False Export Raises Doubts About China'S Trade Prospects

China has again reported the phenomenon of false export data.

China's recent strong export figures have been skeptical by falsely reporting export invoices and changing more foreign currency into Renminbi.

In September, China's exports amounted to US $214 billion, far more than expected, with a year-on-year growth rate of 15.3%, the fastest in 20 months.

This seems to be good news for China's economy.

In the context of the weak real estate market, fixed asset investment has slowed down the most powerful driving force for growth.

But economists warn that real export demand may be more weak than what people see.

In September, the gap between Mainland China's exports to Hongkong and Hongkong's imports from the mainland of China increased significantly.

In theory, they are the two sides of the same coin, based on customs data from both places.

In the eyes of analysts, this shows that Chinese exporters are starting to fabricate exports to Hongkong to bypass the country's strict capital controls and bring foreign capital into China.

"The practice of fictitious export invoices has obviously increased again, and we are more firmly aware that China's September export figures do not indicate that the actual exports will maintain a strong growth rate," wrote Gao Luyi, chief economist of RBS, Scotland (Louis Kuijs).

False export

It's an old problem in China.

It can be freely convertible only when it is used for trade, but it is still strictly regulated when it is used for investment.

The RMB interest rate is higher and is in a steady appreciation channel, attracting some people to escape these controls. The most common way is to disguise hot money as export earnings and bring it into China.

Earlier this year, the Central Bank of China planned a devaluation of the renminbi, and foreign exchange regulators launched a campaign against illicit capital flows, reducing the practice.

But in recent months, the RMB exchange rate has rebounded, hitting a 8 month high on Wednesday.

In recent months, Shanghai's stock market has been better than other global stock markets, making the yuan more attractive.

Economists say this time, companies seem to be starting to bypass capital controls with new methods.

Capital Economics's Julian Evans Prichard (Julian Evans-Pritchard) pointed out that China's imports in September also appeared to be false. It can be seen from the gap between China and Korea's respective China's import data from Korea.

"China's imports and exports soared at the same time, indicating that enterprises are using the" round-trip arbitrage "approach, that is, to import a commodity, then to raise the price and to make it.

To a related party, which brings capital into the territory, "Evans Prichard wrote this week.

"We...

There is no convincing reason for why companies are far from Korea and not Hongkong.

Our most reasonable guess is that as the authorities have been fighting against false export invoices, enterprises have to become more imaginative in how to exploit loopholes in the system.

Wang Tao, Rui Yin (UBS) estimated that China's trade growth in the three quarter after the adjustment of the false declaration portion of the invoice was only 11%, rather than 13% in official figures.

This shows that, like consumption, China's exports are good, but it will not be enough to stop the slowdown in growth caused by China's investment.