China Export Gains Spur Renewed Skepticism of Figures

China Export Gains Spur Renewed Skepticism of Figures: Economy

By Bloomberg News  May 8, 2013

China’s export growth unexpectedly accelerated in April even as shipments to the U.S. and Europe fell, spurring Bank of America Corp. and Mizuho Securities Co. analysts to say the figures were inflated by fake reports. The 14.7 percent increase, reported by the General Administration of Customs in Beijing today, was led by a 57.2 percent jump in shipments to Hong Kong that highlighted suspicions of false transactions used to mask capital flows into China. A customs spokesman said last month that the agency would investigate the “extraordinary” gain in trade with Hong Kong. The report deepens skepticism on the reliability of trade data from the world’s largest exporting nation, with Royal Bank of Scotland Group Plc saying export gains may be overstated by 9 percentage points. Regulators announced a crackdown this week on companies using trade reports to disguise speculative money inflows chasing a yuan that’s already exceeded last year’s gains against the dollar. “Exports actually haven’t done all that well,” Louis Kuijs, the RBS chief China economist who previously worked for the World Bank, said on Bloomberg Television from Hong Kong. That reflects a “pretty weak global picture, weak demand for Chinese exports” and the impact from yuan appreciation on China’s shipments, he said. Today’s report showed a 0.1 percent drop in U.S. shipments and 6.4 percent decline in exports to the European Union. Previous figures showed China’s shipments to Hong Kong rose 92.9 percent in March, while Hong Kong said imports from China rose 13.8 percent. Question Numbers

Economists from Bank of America Corp., Societe Generale SA, Nomura Holdings Inc., Mizuho Securities Asia Ltd. and Australia & New Zealand Banking Group Ltd. joined Kuijs in questioning today’s export numbers, building on skepticism over previous data this year.

“We advise caution in interpreting these figures,” said Yao Wei, China economist at Societe Generale in Hong Kong. The report on April trade was again at odds with the “unambiguous disappointment” in figures from South Korea and Taiwan, she said.

South Korea said May 1 that exports rose 0.4 percent in April from a year earlier while Taiwan said yesterday that its shipments abroad fell 1.9 percent.

The Shanghai Composite Index rose 0.3 percent at the 11:30 a.m. local-time break, while the yuan strengthened 0.2 percent against the dollar at 12:18 p.m.

The median estimate of 39 economists surveyed by Bloomberg News was for export growth of 9.2 percent, with projections ranging from 5.1 percent to 15.8 percent.

Domestic Demand

Import gains of 16.8 percent exceeded the median analyst forecast of 13 percent and March’s 14.1 percent increase, which may ease concern that domestic demand is slowing after the world’s second-largest economy unexpectedly decelerated last quarter. Bank of America said the data on inbound shipments are more accurate than exports and “send encouraging signs” about demand within China.

The trade surplus of $18.2 billion was higher than projected and follows a March deficit of about $880 million.

China’s currency regulator said this week that it will increase scrutiny of cross-border capital flows by importers and exporters to prevent speculative funds from entering the country disguised as payments for trade.

That crackdown “may help China’s trade growth return to its true level,” ANZ said in a note today.

Monitor Activity

Recipients of the regulator’s warnings have 10 days to explain the need for their transactions and those who fail to comply or are unable to provide satisfactory proof will then be placed on the agency’s so-called B list, which means their activities will be closely monitored for at least three months.

Inflation figures are due tomorrow from the National Bureau of Statistics, which on May 13 will release numbers on retail sales, industrial production and fixed-asset investment. The People’s Bank of China is also set to report on lending and money-supply growth.

An official survey of 3,000 manufacturers, known as the Purchasing Managers’ Index (SHCOMP), showed May 1 that new export orderscontracted in April for the third time in four months. A widening discrepancy between China’s data on exports to Hong Kong and the city’s figures on imports from China raises questions about mainland numbers, according to researchers including IHS Inc.

Shenzhen Trade

Bank of America said in a note today that “actual external demand should be much weaker than the headline export figure would suggest,” while ANZ said the figures indicate that capital flows embedded in trade remain “unchecked.” ANZ in a note yesterday fingered “round-tripping” and over-invoicing of trade between Hong Kong and Shenzhen, just across the border, as a main force behind China’s export growth.

China Cosco Holdings Co., the nation’s biggest shipping company, on April 26 reported a loss of 1.99 billion yuan for the first quarter of 2013, as dry-bulk shipping volumes rose less than 1 percent.

The customs agency last month acknowledged concerns that the data may be overstated at a press briefing while standing by its figures and saying the differences with Hong Kong’s numbers stem from different statistical methods.

The administration will “work with relevant departments to conduct deeper and more detailed investigations and research so that we can be completely clear about various reasons behind the extraordinary trade growth with Hong Kong,” Zheng Yuesheng, a spokesman, said at the briefing in Beijing.

Elsewhere, Germany will report March industrial output data today, while U.S. mortgage application figures are released and Russiaannounces its gold and foreign-currency holdings. Poland will set interest rates. New Zealand’s central bank today announced requirements for banks to hold increased capital to guard against risks in home lending.

–Zhou Xin, with assistance from Zeb Eckert in Hong Kong. Editors: Scott Lanman, James Mayger

To contact Bloomberg News staff for this story: Zhou Xin in Beijing at xzhou68@bloomberg.net

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 (www.heroinnovator.com), 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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