THE United States' trade deficit with China ballooned to US$1.8 billion in May, up sharply from the $1.49 billion in April, according to figures released yesterday. At the same time, the US Commerce Department reports that a narrowing of the trade gap with Japan helped to shrink the overall US trade deficit to $8.37 billion from a revised $10.18 billion in April. But any encouragement over yesterday's US figures may be short-lived because Tokyo has since reported that its surplus with the US rose once more in June. The politically sensitive trade deficit with Japan - a major plank in discussions by Group of Seven leaders earlier this month - shrunk to $3.75 billion against $5.49 billion in April. This is the biggest monthly drop since December 1986, when there was a $2.8 billion drop, the Commerce Department says. While the full glare of the political heat has been largely focussed on Japan, China's consistent ability to sell far more to the US than it buys has long been a thorn in the side of the American administration. Bank of East Asia head of economic research Benjamin Chan Sau-san said: ''China's imports are increasing but their agricultural imports from the US have been reduced because agricultural production in China is very good in 1992-1993, so they can trim imports of these goods from America. ''This is one of the reasons why the deficit continues to grow, even though China is increasing its imports from other countries.'' Analysts also believe China's austerity programme, to be rolled out over the coming months, will further exacerbate the gap. While heavy industry goods are likely to stay in demand, consumer spending stands to tail off. The US managed to chalk up a $285.6 million surplus in May with Hongkong, up from April's $207.4 million. The US economy has shown signs of slow revival as consumer demand firms up. But trade is a weak spot because overseas markets remain soft, especially in Europe, so exports are unlikely to provide a major push for the slow-paced recovery.