On the face of it, China’s April trade figures look healthy: exports were up 14.7% year-on-year; imports were up 16.8% on the same basis; the trade surplus was $18.2 billion. All three figures were better than forecast. And from there it is possible to draw a straight line to the notion that these figures indicate a revival of global demand which in turn will boost China’s GDP growth.
The question is, how reliable are the base figures. March’s trade numbers were incredible, in a bad way. The suspicion was that some Chinese companies were cooking their order books in order to get funds to speculate on the appreciation of the yuan against the dollar, essentially disguising hot money as trade payments. This was done by parking goods in Hong Kong and booking them as exports so they could get forex loans from the banks, or in some case, we suspect, by just creating phantom export orders.
The practice was so widespread that authorities earlier this month announced measures to crack down on these hot money inflows, and threatened “strict supervision” of any import-export operation whose booked and actual shipments appeared out of kilter. These measures take effect at the the end of June, giving companies time to get their books in order. But meanwhile monthly trade figures have to be looked at with a healthy dose of skepticism.
This Bystander notes, for example, that April’s purchasing managers’ indexes showed manufacturers’ new export orders shrank, the opposite to what the April trade figures imply. Nor do China’s monthly trade figures jibe with those of South Korea and Taiwan, both of which reported weakening trade for the month. As we can’t trust the trade figures, we won’t be drawing an assumptions about what they mean for the economy as a whole.