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China Export Gains Understated on Fake-Data Distortions

October 11, 2013
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China is poised to post its first slowdown in export growth in three months, a result that may understate the strength of demand after fake reports inflated figures in the year-earlier period.

Growth from last month through April 2014 will be "depressed" because of a high basis for comparison, Credit Agricole CIB says. Overseas shipments probably grew 5.5 percent in September from a year earlier, according to a Bloomberg News survey ahead of tomorrow’s customs-administration report in Beijing, down from August’s 7.2 percent and 9.8 percent in September 2012.

The comparisons will complicate investors’ ability to gauge the strength of any economic rebound after two manufacturing gauges trailed projections in September, limiting a recovery that began earlier in the quarter. Additional skepticism over trade figures builds on broader questions about the quality of Chinese data from gross domestic product to jobs.

"The trade numbers in the next couple of months, especially on the export side, will not be a good reflection of demand for Chinese products abroad or overall economic activity, because they will be artificially depressed from what happened a year earlier," said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole in Hong Kong.

Citigroup Inc. and Everbright Securities Co. researchers also said September’s gains may be understated because of last year’s data distortions. Kowalczyk estimates 1 percent growth in China’s exports for September, putting him at the low end of 46 projections ranging as high as 8.2 percent. He sees a "small contraction" in October, citing over-reporting of export gains.

The General Administration of Customs didn’t respond to a faxed request for comment from Bloomberg News.

 

Import Growth

 

The agency will also report tomorrow that imports rose 7 percent last month from a year earlier, equal to August’s pace, with a trade surplus of $26.2 billion after $28.5 billion in August, based on the median estimates of analysts surveyed by Bloomberg News.

The customs administration has no plans to revise January- April trade figures, Zheng Yuesheng, an agency spokesman, told reporters in July. The data for those months reflect arbitrage- related trade, and current figures with respect to Hong Kong trade are true to facts, he said at the time.

Bilateral trade data reported by China and Hong Kong showed widening differences over 2011 and 2012, with Hong Kong passing the U.S. in November to become the biggest export market in China’s figures. Since June, Hong Kong has returned to third place behind the U.S. and European Union.

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