Earlier today, China published its official April trade figures.
And while the numbers for both imports and exports were much stronger than expected, experts have been left scratching their heads over the unusual discrepancies.
For one thing, exports surged 14.7% year-over-year even as exports to the U.S. fell by 0.7%. Exports to the EU fell by 6.4%.
In a note to clients, Nomura’s Zhiwei Zhang attributed it to companies trying to get around strict Chinese capital controls.
“We believe exports to destinations like Hong Kong, a major financial hub, are likely being over-invoiced in an attempt to circumvent capital controls and bring foreign capital into China,” said Zhang who pointed out that exports to Hong Kong surged by 57.2%.
Societe Generale’s Wei Yao agrees with Zhang.
“As for reasons, our observation from the trips to the mainland led us to believe that there is indeed a large amount of speculative capital flows,” wrote Yao in a note to clients. “Nearly all corporates we met admitted that they were conducting some forms of interest rate arbitrage on the expectation of further yuan appreciation.”
But Hong Kong wasn’t the only discrepancy.
Yao noted a whopper in the Taiwan numbers.
“Head-scratching discrepancies in bilateral data comparison persisted on both sides of the ledger,” she wrote. “Compared with the data from Taiwan – the only economy besides China that has published the complete set of April data – growth of mainland exports to Taiwan was 57.7 ppt faster based on China’s data (+49.2% yoy vs. -2.7% yoy) and that of mainland’s imports from Taiwan was 58.6ppt faster (+55.7% yoy vs. -2.9% yoy)! The gaps narrowed only marginally from March.”
No wonder people question the reliability of the data.