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China: Discrepancy with Hong Kong trade data surges - Nomura

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Jan 27, 2016.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Delhi) – Research Team at Nomura, suggests that the discrepancy between Chinese and Hong Kong trade data has surged recently, confirming their earlier concerns that capital flows distorted December trade data.

    Key Quotes

    “In December, China recorded USD45.9bn of exports to Hong Kong, while Hong Kong reported only USD23.7bn of imports from China, resulting in the largest statistical discrepancy (USD22.2bn in value or 1.94 as a ratio) since March 2013.

    Apart from the difference in price reporting for exports (f.o.b. basis) and imports (c.i.f. basis), the gold trade plays a large role in the statistical discrepancy as Hong Kong does not count gold in merchandise trade. Gold and precious metals are often used to inflate trade invoicing, and indeed Hong Kong reported that gold trade with the mainland surged in December.

    The discrepancy confirms our earlier suspicion that China’s trade recovery in December may have been distorted by capital flows. Given the large difference between CNY/USD and CNH/USD, there is some potential for arbitrage between the two. By reporting larger-than-actual trade, traders could bring more RMB onshore and more US dollars offshore.

    Overall, we still see strong downward pressures on the real economy and maintain our forecast of 5.8% GDP growth for 2016.”
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