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Sunday 16 June 2013

China Fake Export Trade Data Reached US$75bn January - April

Following on from my article about China exporting inflation which I argued that one of the ways money is leaking out of the country is through inflated trade.  Officials in China have confirmed that fake exports through Shenzhen special supervision zone reached US$75 billion.
That is a huge sum considering it is only 4 months worth of data.  On an annualized basis it is US$225 billion or RMB1.4 trillion.  To put it into context, China's GDP is US$9 trillion and projected to grow 7.5% or $675 billion.  This is about a third of the GDP growth if it were to continue.

The report stop short, very short, to follow through to the other side of the trade.  The fundamental question: Why? 

Is it a government sanctioned bump up the trade numbers to make as though the economy is expanding? or

To obtain financing as a government researcher within the commerce ministry have opined because liquidity have dried up in China for many corporations? or

Removing cash out of the country by having fake importers at the HK end where money is then deposited in commercial banks in HK rather than sweeping it back into China.  Middle men on both sides could act as conduit with physical cash never actually having to leave the country.  A way to cleanout cash from the country.

We will never know the exact net in and out details, everything in China is pretty opaque.  My guess is that it is both ways, liquidity is drying up in China and sensing increasing economic headwinds and political crackdowns in China, many wealthy are desperate to leave.    

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