Is China's Export Data So Strong?

The forty-eighth meeting of the Second Council of the Dalian Mercantile Exchange recently considered and adopted an amendment to the polypropylene futures contract and its related rules, which means that the market awaited the accelerated pace of the listing of PP contracts.

It is understood that after the approval of polypropylene futures, the big business office was released in January 17th. Notice of soliciting opinions on polypropylene futures contracts and related rules To solicit opinions from the market on polypropylene futures contracts and related rules. On the 27 day after the end of the solicitation, DQ made a careful combing of the views, and communicated with the source party, and completed the amendment to the contract and the relevant rules reported to the Council of exchange.

According to the relevant personages at DAC, from the perspective of market feedback, member units and industrial customers highly agree with PP contracts and rules design, especially from the perspective of their own production and operation, controlling risks and improving the efficiency of hedging. At the same time, we believe that the good operation of petrochemical futures such as LLDPE and PVC provides experience and foundation for PP futures contract design and future market operation, so we are confident that this variety will be successfully operated and functioning after listing.

Market analysts believe that from then on New variety In the case of the approval of the listing to the listing, the general exchange will openly seek advice from the market after the approval of the securities and Futures Commission. After combing the opinions and suggestions, the contract rules will be submitted to the Council for deliberation, and the listing application will be submitted to the SFC. China's export figures in January were unexpectedly strong, at the time when its main trade neighbours declined. This again raises questions about the credibility of China's official data and highlights the difficulty of tracking China's second largest economy in the world.

Data released on Wednesday showed that China's exports increased by 10.6% over the same period in January, higher than expected, with strong demand in the US and Europe. Many economists had predicted that China's export volume would increase slightly or zero in January, because China's manufacturing industry lost kinetic energy in January, and the economic growth slowed down in the fourth quarter of last year.

Gao Luyi, economist at Royal Bank of Scotland, Scotland, believes that it is difficult to judge the current situation, and really needs to investigate the whole story just like a detective.

What is even more puzzling is that the data in mainland China does not seem to correspond to the 4.6% and 0.2% decline in exports of Taiwan and Korea in January respectively. The last two economies usually share strong trade flows that benefit the Chinese mainland. The spring golden week holiday, which began in late 1, should have cut exports rather than stimulating exports.

These perplexities have once again triggered economists and analysts suspect that Chinese enterprises "falsely" export data. This phenomenon has been widespread in early 2013, because false declaration is a means for enterprises to increase export volume, so that they can avoid government capital controls and bring more capital into China.

Economists believe that the conditions for false reporting are ripe now because China's interest rate is rising and the renminbi is expected to appreciate. Si Keli Karlis Smits, a World Bank senior economist in Beijing, says there are many reasons for hot money to enter China.

For both analysts and customs officers, false exports and other similar behaviors are hard to find. There is little evidence of fraud on Wednesday's data. In some economists' view, this shows that the substantial increase in China's export volume in January is true, or that enterprises have found a more subtle way of reporting. {page_break}

Data show that the volume of trade flows to Hongkong or through bonded areas declined in January. Transporting goods through these areas and reporting high value is widely used to cover up false transactions last year, whether for arbitrage, tax avoidance or concealment in different markets. The data also show that China's exports to the United States, Europe and Japan have increased substantially, making it more difficult to fake trade in these large markets.

In the past, small, high priced goods with various prices, such as computer chips, were used to cover the transfer of funds. Now electronic currency bitcoin has become another way to bypass government capital control. China is still implementing capital controls to prevent the rapid transfer of capital. The government is worried that the rapid transfer of capital may affect the stability of the economy. In December last year, China banned financial institutions from dealing with virtual currency transactions, but individuals could still buy and sell virtual currencies through unregulated online trading channels.

A trader who asked for anonymity in Hongkong said that many of his domestic competitors export steel at zero profit as a way to increase capital inflow, tax avoidance and special foreign investment incentives. They have made use of interest rates and Renminbi to earn money, which has so far remained stable.

Brian LeBlanc, an economist at Global Financial Integrity, a non-profit organization in Washington, has been studying this problem. According to his estimate, in 2012, $101 billion of illegal funds borrowed from Hongkong to enter mainland China. This amount approximated to the amount of legal foreign direct investment (FDI) in 2012, which amounted to 112 billion US dollars.

China has succeeded in combating the value of false claims. In May last year, regulators announced that they would increase their scrutiny of cross-border settlement, and export growth declined rapidly. In December, relevant departments asked banks to examine their customers' trade settlement carefully and report suspicious activities. On the whole, the government has asked officials not to publish distorted data and to ensure the accuracy of economic data.

ANZ Bank economist Liu Li Gang Despite the fact that trade is still widely used to conceal capital flows, the level of high value of goods is probably declining compared with the beginning of 2013.

But as regulators strengthened the control of the value of false opening, foreign trade enterprises found new (sometimes legitimate) loopholes, including round-trip investments. According to this method, the goods are exported to foreign countries, and the payment is paid by foreign capital with low interest rates. These loans are then invested in China for 5% or higher returns. A few months later, the goods returned to China, and the money returned to foreign countries, but the import companies made profits from the investment in China.