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10 Apr 2013
Forex Flash: China's exports could still be overstated - Nomura
FXstreet.com (Barcelona) - Nomura economist, Rob Subbaraman notes that China's exports to Hong Kong and Hong Kong's imports from China do not match.
He notes that China‟s export growth slowed sharply to 10% y-o-y in March from 23.6% in Jan-Feb, but it is possible that underlying export growth is much weaker. The export growth data in March is much higher than that of Taiwan (3.3%) and Korea (0.3%). He comments that the details show that China‟s exports to Hong Kong, which accounted for 27% of the total, soared by 93% y-o-y in March, exceeding the already high growth of 61% in Jan-Feb. Yet , he adds, Hong Kong‟s imports from China grew only 7.8% in Jan-Feb (March data are not yet out). Hong Kong is an entrepôt for China‟s exports, notably to the US. However, US imports from China and Hong Kong combined grew just 11.4% in Jan-Feb, more closely matching Hong Kong‟s data than China‟s. He finishes by commenting that, “Hong Kong is a financial hub, so it could be that companies in China are over-invoicing their exports for tax benefits, or to get around capital controls, but this raises the question: why all of a sudden? We are not sure, but we do know that net FX purchases by China‟s banks surged by USD109bn in January, more than the USD78bn gain for the whole of 2012.”
He notes that China‟s export growth slowed sharply to 10% y-o-y in March from 23.6% in Jan-Feb, but it is possible that underlying export growth is much weaker. The export growth data in March is much higher than that of Taiwan (3.3%) and Korea (0.3%). He comments that the details show that China‟s exports to Hong Kong, which accounted for 27% of the total, soared by 93% y-o-y in March, exceeding the already high growth of 61% in Jan-Feb. Yet , he adds, Hong Kong‟s imports from China grew only 7.8% in Jan-Feb (March data are not yet out). Hong Kong is an entrepôt for China‟s exports, notably to the US. However, US imports from China and Hong Kong combined grew just 11.4% in Jan-Feb, more closely matching Hong Kong‟s data than China‟s. He finishes by commenting that, “Hong Kong is a financial hub, so it could be that companies in China are over-invoicing their exports for tax benefits, or to get around capital controls, but this raises the question: why all of a sudden? We are not sure, but we do know that net FX purchases by China‟s banks surged by USD109bn in January, more than the USD78bn gain for the whole of 2012.”