The trade deficit narrowed 8.4 pct to $58.9 bln in October.

Despite the October decline, the economy is expected to post a record annual trade deficit for the fifth consecutive year as the trade deficit with China continued to soar to record levels.

For the third straight month, the shortfall with China rose to its highest level ever, increasing 6.1 pct to a record 24.4 bln usd as imports rose 6.2 pct to a record 29.3 bln usd.

The yuan ended at 7.8308 to the US dollar on the over-the-counter (OTC) market, compared with 7.8350 yesterday.

The growing trade deficit with China will increase the american pressure on that asian country to increase the value of its currency.

U.S. Treasury Secretary Henry Paulson, who leads a high-level delegation to China this week, warned Beijing on Friday that the world was growing impatient for economic and currency reforms.

Following up on Monday in an article he wrote in the Washington Post, Paulson added: “The United States believes China can do more to reduce its trade surplus. We are encouraging China to introduce greater flexibility for its currency.”

In response, a senior Chinese central banker reaffirmed Beijing’s determination to let market forces play a greater role in determining the yuan’s exchange rate, but said currency adjustments alone could not iron out trade imbalances.

“The exchange rate issue is A) a sovereign issue and this is our principle. B) We will take internal and external balances into account when making decisions on the yuan,” People’s Bank of China Assistant Governor Yi Gang told reporters on the sidelines of a financial forum.

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