China became Japan's biggest trading partner in 2004, replacing the United States for the first time and underlining the country's growing clout in the global economy.</PARAGRAPH> <PARAGRAPH>Finance Ministry data released Wednesday show that Japan's exports to and imports from China, including Hong Kong, amounted to 22.20 trillion yen in 2004 -- the highest since records began in 1947 -- outpacing the 20.48 trillion yen in trade with the U.S.</PARAGRAPH> <PARAGRAPH>China represented 20.1 percent of Japan's trade in 2004, compared with 18.6 percent for the U.S., a ministry official said. In 2003, the U.S. had 20.5 percent and China 19.2 percent.</PARAGRAPH> <PARAGRAPH>Exports to China came to 11.83 trillion yen and imports reached 10.37 trillion yen, giving Japan a 1.46 trillion yen customs-cleared trade surplus with China.</PARAGRAPH> <PARAGRAPH>Exports to the U.S. came to 13.72 trillion yen and imports to 6.76 trillion yen, for a 6.96 trillion yen trade surplus for Japan.</PARAGRAPH> <PARAGRAPH>Private-sector economists predict that China's economy will keep posting steady growth in the coming years following a 9.5 percent expansion in 2004, and that the country, now the world's key production base, will become even more important for Japan both in terms of exports and imports.</PARAGRAPH> <PARAGRAPH>'2004 was symbolic as it showed a structural change regarding China's comparative advantage in –

trade," said Yukari Sato, chief economist at Credit Suisse First Boston Securities (Japan) Ltd.

Economists and government officials predict that Japan's trade with China will grow further, given lower tariffs and an improving investment climate spurred by China's entry into the World Trade Organization in 2001.

According to the report, Japan's worldwide trade surplus in 2004 grew 17.9 percent from the previous year to 12.01 trillion yen for the third straight year of increase.

Exports increased 12.2 percent to 61.18 trillion yen and imports grew 10.8 percent to 49.17 trillion yen.