It looks like China's December trade report points to an increase in... dodgy figures

Photo by Kevin Frayer/Getty Images

Chinese exports to Hong Kong recorded their largest increase in over a year in December, helping to boost the nation’s export figure and casting doubt over the apparent strength of the December trade data.

According to data released by China’s customs department, exports to Hong Kong rose to $46 billion last month, an increase of 10.8% on a year earlier. It was the highest monthly total in almost three years, and the largest December figure in the past decade.

Adding to doubts over the export figure, Hong Kong imports to China surged 65% to $2.16 billion, the highest level in three years.

After digging into the December report and uncovering the anomaly, many prominent economists suggest that the increase may have been as a result of fake invoicing between counterparties in Hong Kong and the Mainland, a tactic that up until recently was used to skirt China’s strict currency restrictions.

If true, it would have artificially inflated December’s export figure.

Iris Pang, a senior economist for Greater China at Natixis SA in Hong Kong, told Bloomberg that the increase in exports to Hong Kong and China’s imports from the city probably indicate “fake invoicing”.

That sentiment was echoed by Larry Hu, head of China Economics at Macquarie Securities in Hong Kong, who told Bloomberg that the imports gain from Hong Kong “points to potential renewed fake trade activities”.

Hu notes that when the yuan rose in 2013, exports to Hong Kong were inflated artificially and “now it’s just the opposite”.

Yesterday the government released its trade figures for December, with both exports and imports beating expectations.

The strength of data, an anomaly in itself based off the recent trend, was partially responsible for lifting risk assets across the region, including those closely tied to the performance of the Chinese economy such as the ASX 200 and Australian dollar.

You can read more from Bloomberg here.

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