Business

China estimates fake trade invoicing at US$75b in January-April, says report

June 14, 2013

New trucks manufactured by Chinese automaker Chery are seen parked before being loaded for export, next to a ship at a port in Lianyungang, Jiangsu province in this June 2, 2013 file photo. — Reuters picNew trucks manufactured by Chinese automaker Chery are seen parked before being loaded for export, next to a ship at a port in Lianyungang, Jiangsu province in this June 2, 2013 file photo. — Reuters picSHANGHAI, June 14 — Fake invoicing inflated China’s official import and export totals by US$75 billion (RM235 billion) in the first four months of 2013, local media reported today, citing an internal review by China’s commerce ministry.

An alternate estimate found that actual year-on-year export growth for January to April was only around seven per cent, while import growth was about six per cent, the 21st Century Business Herald reported, citing an unidentified source and an internal commerce ministry document.

The second estimate was based on excluding data from the port of Shenzhen, where much of the fraud is suspected to have occurred.

Evidence has been growing in recent weeks that the world’s second-largest economy is fast losing momentum, but suspect trade data has clouded the picture for global investors.

China’s customs administration officially reported export growth of 17.4 per cent in the first four months of the year, while imports officially grew 10.6 per cent.

But analysts widely suspected that the data was distorted by inflated invoices used to circumvent China’s strict capital controls and profit from appreciation of the Chinese currency.

Reported trade growth nose-dived in May, with exports rising only 1 per cent and imports falling 0.3 per cent.

The sharp drop occurred after China’s customs agency promised to probe inconsistencies between China’s export data and data on Chinese imports published by trading partners such as Hong Kong.

China’s foreign exchange regulator also issued new rules in early May strengthening oversight of trade invoicing.

The US$75 billion estimate was based on an examination of logistics data from China’s special customs regulation zones. Such zones are the site of China’s bonded warehouses, where analysts suspect much of the fake invoicing occurred.

Bonded warehouses are physically located inside China, but domestically-produced goods stored there have already cleared customs and are therefore counted as exports.

Imports and exports to and from the special regulation zones increased by 130 per cent year-on-year in January through April, compared to only 19.1 per cent in May, after tighter oversight began.

Assuming the true growth rate for January through April was similar to the reported growth rate in May produces an estimate of US$75 billion in fake trade. That compares to official data showing combined imports and exports totalling US$1.33 trillion in the same period. — Reuters

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