China's trade surplus narrowed to 20.03 billion U.S. dollars in August from July's 28.73 billion dollars because the growth of imports accelerated as a result of strong domestic demand.

China's exports grew 34.4 percent in August from one year earlier, slowing from July's 38.1-percent surge, while imports rose 35.2 percent year on year, sharply up from the 22.7-percent increase in July, the General Administration of Customs (GAC) said Friday.

Zhang Hanlin, a researcher at the Beijing-based University of International Business and Economics, said although export growth slowed, it remained at a high level, while brisk demand for raw materials, boosted by China's strong economic development, contributed to the higher-than-expected imports growth.

On a month-on-month basis, imports rose 2.1 percent in August while exports fell 4.3 percent, according to customs statistics.

Surging raw material prices also contributed to China's imports increase, said Zhao Jinping, a senior researcher with the Development Research Center of the State Council, or the Cabinet.

China's iron ore imports inched up 0.1 percent year on year to 410 million tonnes in the first eight months this year, while the average import price surged 55.1 percent to 118.6 U.S. dollars per tonne. Refined oil imports fell 8.5 percent to 23.88 million tonnes during the period, but their value climbed 30.1 percent compared with the same period last year.

Growth rates of China's exports declined from May's 48.5 percent, June's 43.9 percent and July's 38.1 percent.

Uncertainties over the exports outlook continued during the fourth quarter of this year, including the development of the U.S. employment situation, the European Union sovereign debt crisis and the shopping season before the Christmas holiday, said Zuo Xiaolei, chief economist of China Galaxy Securities.

However, Zhang Hanlin forecast a strong increase in exports in the coming months. "A large part of China's foreign trade is processing trade, which means rising raw material imports will lead to a later increase in the exports of finished products," he said.

China's foreign trade totaled 1.88 trillion U.S. dollars in the first eight months of 2010, a year-on-year increase of 40 percent, while the trade surplus shrank 14.6 percent to 103.9 billion U.S. dollars, the GAC said.

From January to August, processing trade surged 34.8 percent from one year earlier to 730.49 billion U.S. dollars, accounting for 38.9 percent of the country's total trade volume, according to GAC data.

Also, imports of iron ore, crude oil, rubber and logs all surged by more than 50 percent during the period.

A rebound in China's auto sales boosted its imports of auto and auto parts in the January-August period, which increased 140.9 percent year on year to 520,922 units.

According to statistics released by the China Association of Automobile Manufacturers Thursday, the country's domestic auto makers' sales to auto dealers rebounded 6.29 percent month on month to 1.322 million units in August after a monthly decline in July.

China's trade with the European Union, the country's largest trade partner, jumped 36.2 percent year on year to 305.81 billion U.S. dollars in the January-August period, the GAC said.

Lastly, trade with the United States climbed 32 percent to 242.61 billion U.S. dollars during the period, while that with Japan rose 34.8 percent to hit 186.89 billion U.S. dollars.