China Export-Data Skepticism Deepens From Goldman to Nomura

China Export-Data Skepticism Deepens From Goldman to Nomura

China’s unprecedented run of better- than-forecast export growth has spurred deeper skepticism of the data at banks including Goldman Sachs Group Inc., casting doubt on the strength of the recovery.

Gains in overseas shipments exceeded forecasts by at least 7.5 percentage points in December, January and February, the first time that’s happened in three straight months in the eight years Bloomberg has compiled analyst estimates for the data. March figures are due to be released tomorrow at 10 a.m. at a briefing in Beijing, giving the customs administration an opportunity to address the issue.

Overstated exports would mean China is failing to get the boost from global demand that the data suggest as the new government under Premier Li Keqiang seeks to sustain an economic rebound. Theories include companies inflating the value of shipments to bring money into China, according to Nomura Holdings Inc., and exporting the same goods twice as local governments seek to boost data, Goldman Sachs says.

“The recovery in exports is there, but the magnitude probably is much weaker than the official data has been indicating,” said Zhu Haibin, chief China economist at JPMorgan Chase & Co. in Hong Kong.The trade figures are part of a week of China data starting with inflation today and culminating with first-quarter gross domestic product on April 15.

Goldman Sachs said in a March 29 report that investors shouldn’t also be skeptical of the broader growth statistics, because export data don’t enter directly into official GDP.

Trade Documented

The General Administration of Customs hasn’t commented on the data’s integrity beyond a January statement defending their accuracy. The agency, which didn’t respond to faxed questions for this article, said that every dollar of trade is documented and that the statistics only record companies’ actual trade with overseas partners, including those in Hong Kong.

A weakening yen may also pose challenges for China’s exports, complicating the nation’s monetary policy, billionaire investor George Soros said yesterday at the Boao Forum for Asia in China. Japan’s currency has fallen about 22 percent against the yuan in the past six months as new Prime Minister Shinzo Abe steps up efforts to beat deflation.

Exports last month increased 11.7 percent from a year earlier, based on the median estimate of 36 analysts surveyed by Bloomberg News. That’s the highest projection since December 2011 for a month without distortions from the Lunar New Year holiday, which falls in January or February each year. Imports may have advanced 6 percent.

Growth Target

The government last month set a target of 8 percent trade growth this year, down from 10 percent in 2012.

Separately, economic expansion may have accelerated for a second period to 8 percent in the first quarter, while inflation slowed to 2.5 percent in March, according to the median estimate of analysts.

Other data suggest shipments abroad may not be so strong. A gauge of new export orders from a government manufacturing survey was below 50 in January and February, readings that signal contraction. Hong Kong said imports from China dropped 18 percent in February, contrasting with China’s report of a 35.6 percent increase in exports to the city and adding to a widening divergence in figures.

The export data from China also contrast with figures from South Korea and nations in Southeast Asia, as well as Chinese government statistics on industrial goods delivered for exports, according to Yu Song of Goldman Sachs.

Broader Skepticism

The doubts compound broader skepticism about China’s official economic statistics. In October, analysts at Standard Chartered Plc and Capital Economics Ltd. said that China’s third-quarter growth may have been weaker than official data indicated. Li, who became premier last month, said in 2007 that China’s official GDP numbers are “man-made” and “for reference only,” according to a diplomatic cable published by WikiLeaks in late 2010.

Zhang Zhiwei, chief China economist at Nomura in Hong Kong, said export growth “sounds too strong for me.” Alistair Thornton, a Beijing-based economist at researcher IHS Inc., said the figures “look a bit weird.”

Economists offer various theories while emphasizing there’s only limited evidence for them. Mizuho Securities Asia Ltd. says companies may be inflating exports to mask capital inflows. Nomura’s Zhang says it’s difficult for customs to verify declared prices that may be artificially high. HSBC Holdings Plc and Mizuho say companies may be moving goods in and out of special trade zones within China to claim tax rebates, a practice known as “one-day tours.”

SAFE Report

The State Administration of Foreign Exchange said last year that it uncovered 15,000 cases that violate laws and regulations involving foreign exchange from 2007 to 2011, including examples of disguising inbound funds as merchandise trade.

As investor speculation for a stronger yuan mounted in the fourth quarter, a stream of foreign capital flows may have entered China through trade, Wen Bin, a director with the Institute of International Finance at Bank of China Ltd., one of China’s big four state banks, told reporters in Beijing on March 28. “This kind of strong export growth and high surplus is unlikely to be sustained,” Wen said.

–Zhou Xin. With assistance from Stephen Engle, Regina Tan and Jessica Zhou in Beijing, Liza Lin in Shanghai and Phil Kuntz in New York. Editors: Scott Lanman, Sunil Jagtiani

To contact Bloomberg News staff for this story: Zhou Xin in Beijing at

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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