* Trade surplus surges, U.S.-China yuan row back in focus
* Trade surplus hits $28.7 bln versus $19.0 bln forecast
* Exports up 38.1 pct y/y, beat forecasts, vs 43.9 pct June
* Import growth moderates to 22.7 pct y/y, below expectations
* Annual house price inflation drops; prices steady on month
By Langi Chiang and Alan Wheatley
BEIJING, Aug 10 (Reuters) - China's trade surplus surged unexpectedly in July to an 18-month high of $28.7 billion as exports beat forecasts, but a government-induced slowdown in investment took a toll on imports.
Beijing is steering its super-loose monetary and fiscal policies back to normal after a record surge in credit last year to combat the global crisis. It has reined in lending to local authorities and mounted a drive against property speculation.
Annual import growth moderated to 22.7 percent from 34.1 percent in June, well below forecasts of a 30 percent rise, providing clear evidence that the measures are biting.
"We have carried out a proactive adjustment of economic growth. With economic growth slowing down, import growth is also easing," Huang Guohua, an official at the General Administration of Customs, which released the data, told state television.
Reuters Insider on the data: http://link.reuters.com/feq24n
Graphic on trade trends: http://link.reuters.com/keq24n
Story on July property data ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
The disappointing figures, which partly reflected a 4.5 percent fall in import prices in July, sent the main Shanghai stock index tumbling 2.3 percent and weighed on shares in Hong Kong, underlining investors' fears that the global economic recovery is losing momentum.
"We expect import growth to slow further for the rest of the year as the domestic economy is coming off the boil," said Nie Wen, an analyst at Fortune Trust Co in Shanghai.
Exports, by contrast, held up well in July, rising 38.1 percent from a year earlier to a record high of $145.5 billion.
Growth was down from June's 43.9 percent pace but exceeded projections of a 35.5 percent rise, partly because exporters rushed to beat the July 15 removal of tax rebates on an array of steel and other products.
The resulting trade surplus of $28.7 billion, the highest since January 2009, dwarfed forecasts of $19.0 billion as well as June's $20.0 billion total.
Brian Jackson, a strategist at Royal Bank of Canada in Hong Kong, noted that figures due out later this week were likely to show a U.S. trade deficit of more than $40 billion.
"This contrast in the trade position of the two most important economies in the world will likely increase the pressure from Washington for Beijing to allow further currency appreciation, particularly in the lead-up to mid-term elections in November," he said in a note to clients.
The yuan has risen just 0.8 percent against the dollar since Beijing scrapped a 23-month peg to the U.S. currency on June 19 and reinstated a managed float.
MIXED SIGNALS
The trade outlook for the rest of the year is cloudy.
Yu Song and Helen Qiao, economists at Goldman Sachs, detected signs that Chinese policy had started to loosen, which they said should lend more support to domestic demand and import growth.
But most analysts do not expect the government to relax yet a series of curbs imposed on the property market in April.
Fearing that prices were feeding on themselves and putting the cost of a flat beyond the reach of ordinary people, Beijing increased down-payments and mortgage rates, made it tougher to buy multiple homes and tightened financing for developers.
Figures on Tuesday showed the restrictions appeared to be working, albeit slowly.
House prices in 70 cities across China rose 10.3 percent in the year to July, down from 11.4 percent in the 12 months to June and a peak in April of 12.8 percent, the National Bureau of Statistics said.
But prices on the month were unchanged in July, following a 0.1 percent drop in June.
Jinsong Du, an analyst at Credit Suisse in Hong Kong, saw no need for fresh curbs but said prices in major cities still had scope to fall another 20 percent by the end of the year.
"The government should be pleased that prices are not rising on a monthly basis," Du said. "In the near term, they will continue to strictly implement the measures they've already announced."
As for exports, China's strong performance mirrored resilience in July figures released by South Korea and Taiwan, indicating that global demand remains strong for now despite worries about the eurozone's debt mess.
But with the outlook for the United States darkening, some economists expect year-on-year export growth to start to fade, especially as the 2009 base of comparison becomes more demanding.
Ben Simpfendorfer, an economist with Royal Bank of Scotland in Hong Kong, said annual growth could slow to 10 percent by December.
At the same time, historical patterns suggest the trade surplus will grow in the second half of the year, possibly reaching $30 billion by December, Simpfendorfer said.
Such a combination could militate against the exchange-rate shifts needed to produce better-balanced trade.
"The two developments will only add to Washington's insistence on a stronger yuan and Beijing's resistance," he said in a note. (Additional reporting by Zhou Xin and Aileen Wang in Beijing and Lee Chyen Yee in Hong Kong; Editing by Ken Wills & Kim Coghill)