Tim Condon, Chief Economist at ING, suggests that the disappearance of the USDCNY-USDCNH basis supports Governor Zhou’s argument that import over-invoicing is not a significant channel of capital flight. Key Quotes “February trade data is due tomorrow. The consensus forecast for export growth is -15.0% YoY (prior -11.2%), which would put year-to-date growth at -11.3%, which would indicate a third step down in export growth over the past year. The import growth forecast, -10.2% (prior -18.8%), is more interesting because of the wide gap between customs-basis imports and the foreign exchange banks report having sold to customers to pay for goods imports. The $524 billion discrepancy in 2015 is the basis for claims that, due to capital flight, China’s actual trade surplus in 2015 was far smaller than the reported, record $593 billion. In his Caixin interview PBOC Governor Zhou distinguished capital outflows from capital flight and said flows arising from differences in the timing of banks’ forex sales for customers’ import purchases and those customers actually paying for the imports as not necessarily capital flight. The disappearance of the USDCNY-USDCNH basis supports Governor Zhou’s argument.” For more information, read our latest forex news.