Trade data shocks market

By Song Shengxia Source:Global Times Published: 2013-5-9 1:38:01

Customs data Wednesday revealed that China's export and import growth expanded in April from a year earlier, beating economists' expectations and offering a positive sign that the economic recovery is gaining traction in China.

The better-than-expected data also prompted economists to question its accuracy, with some saying the data may have been inflated by Chinese exporters to circumvent capital control on funds they bring into the country.

Exports expanded 14.7 percent year-on-year in April, accelerating from the 10 percent pace in March, while imports rose to 16.8 percent, up from March's 14.1 percent growth, the General Administration of Customs (GAC) said on Wednesday.

The figure led to an $18.2 billion surplus in trade in April, rebounding from a deficit of $884 million in March.

The higher export growth in April could be partly caused by a low base figure from the same period last year, Chen Hufei, a researcher with the Bank of Communications. told the Global Times Wednesday. 

"It may be partly driven by the fact that there are two more working days in April than last year. Moreover, it is inconsistent with the weak trade data in Korea and Taiwan, which suggests it may reflect continued capital inflows in April," Zhang Zhiwei, chief China economist at Nomura in Hong Kong said in a research note sent to the Global Times Wednesday.

China's exports have posted robust growth figures in recent months, which is not in line with the weak trade data in other Asian exporter countries and regions.

Meanwhile, the Chinese mainland's exports to Hong Kong surged over the last few months. The mainland's shipments to Hong Kong rose 57.08 percent year-on-year in April after they peaked at 92.9 percent growth in March. 

The situation promoted economists to suspect that some Chinese exporters may be overstating their trade flows to bypass capital controls and bring capital into China.

"Due to the effective exchange rate appreciation of the yuan recently, overseas capital flows into the country through re-export trade from Hong Kong," Chen said.

"There is indeed a large amount of speculative capital flows. Nearly all companies we met admitted that they were conducting some form of interest rate arbitrage on the expectation of further yuan appreciation," Yao Wei, a Hong Kong-based economist with Societe Generale SA told the Global Times Wednesday.

"Miscounting of such flows under the trade account makes it difficult for the authorities to gauge the actual strength of China's export sector, thus risking policy mistakes," Yao said.

Tao Yong, a press office staff member of  GAC told the Global Times the administration will not make any more comments regarding questions over the accuracy of trade data, other than what it had stated in April.

At a press briefing in April, GAC spokesman Zheng Yuesheng said the administration was looking into the issue of the extraordinary trade growth with Hong Kong and would take regulatory measures if necessary.

"Customs data relies mainly on customs declaration forms by export companies. Some multinational companies reported Hong Kong as the final export destination but in reality some goods are transshipped to other markets from Hong Kong," Zheng said.

The State Administration of Foreign Exchange (SAFE), the country's foreign exchange regulator, announced Sunday fresh measures to control cross-border capital flows by importers and exporters and impose penalties on companies faking data.

Analysts said the announcement may indicate that the practice of faking trade data has already roused concerns of the authorities.

"The mainland's exports to Hong Kong dropped in April after customs tightened control over false trade flows. With the SAFE's new measures, false transaction data will continue to drop in May," Li Youhuan, an economist at the Guangdong Academy of Social Sciences, told the Global Times.

"Given the improvement in import data and structure of imported commodities in April, China's economy did show positive signs of recovery. Neither talking down China's economy nor over-optimism over the economy is advisable," Li stated.

 "Some import data sent encouraging signs that domestic demand is on track to a recovery," Lu Ting, a China economist with Bank of America Merrill Lynch said.



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