China’s exports rose less than forecast for the first time in four months, fueling concerns about the outlook for trade as the government said it’s investigating reports of inflated figures.
Shipments abroad increased 10 percent in March from a year earlier, the customs administration said today in Beijing, while imports rose by an above-forecast 14.1 percent, leaving an unexpected trade deficit of $880 million. An “astounding” 92.9 percent jump in exports to Hong Kong, the most in 18 years, raises questions on data quality, researcher IHS Inc. said.
The customs agency acknowledged concerns that the data may be overstated at a press briefing today while standing by its figures and saying the Hong Kong gains stem from different statistical methods. Sales to the U.S. and Europe both fell for the first time since November, leaving the world’s second-largest economy with weaker global demand to support a recovery.
“This 10 percent export growth is more real as it’s in line with other data” including power consumption, industrial production and transportation, Lu Ting, chief Greater China economist at Bank of America Corp. in Hong Kong, said in a note today. January and February’s “abnormally strong” gains were probably distorted by companies’ inflated reports, Lu said.
BHP Billiton Ltd., the world’s biggest mining company, sees China growth “trending down” toward 6 percent after about 7 percent to 8 percent in the next couple of years, Chief Financial Officer Graham Kerr said today at the Bloomberg Economic Summit in Sydney, indicating prospects in its largest customer present its main risk.
Import gains stemmed from rising demand for raw materials, implying fixed-asset investment growth will be “robust” in coming months, Lu said. Imports from the U.S. rose 30.3 percent from a year earlier, while shipments from Australia increased 18.4 percent.
The benchmark Shanghai Composite Index of stocks was little changed at the close. It’s down 1.9 percent this year.
The export gains for March compare with 21.8 percent growth in February and the 11.7 percent median estimate in a Bloomberg News survey of 36 economists.
Exports fell to major partners in March including the U.S., European Union, Japan, South Korea and Canada, the customs administration said today. The main exception was shipments to Hong Kong, which rose to $48.4 billion, accounting for 27 percent of total exports. Sales to Taiwan rose 44.9 percent, while Taiwan this week reported a 1.2 percent decline in imports from China.
“The breakdown of exports by destination veers towards the absurd,” IHS economists Xianfang Ren and Alistair Thornton said in a note today. “There is plenty of anecdotal evidence to suggest that exporters are faking orders” and using a practice to obtain export-tax rebates, IHS said.
Zheng Yuesheng, a customs administration spokesman, said today that the practice of false trade declarations “does exist, but is definitely not mainstream.” Exporters must bear legal responsibilities if they do that, Zheng said.
The agency has made an initial probe into possible money flows disguised as trade with Hong Kong, and will “work with relevant departments to conduct deeper and more detailed investigations and research so that we can be completely clear about various reasons behind the extraordinary trade growth with Hong Kong,” Zheng said at the briefing in Beijing.
At the same time, Zheng reiterated the agency’s stance that every dollar of trade is documented by declaration forms. He said that a difference in statistical methods is the major reason for the discrepancy between bilateral figures reported by China and Hong Kong. One example is that some mobile-phone products are assembled in China then shipped to Hong Kong before re-entering the mainland for sale, which pushes up exports to Hong Kong, Zheng said.
China has yet to see firm evidence of a stable recovery in external demand, Zheng said.
Separately, China’s central bank and financial institutions bought a net 295.4 billion yuan ($47.7 billion) of foreign currency in February, People’s Bank of China data showed today, the second-biggest monthly gain since August 2011. Buying may reflect inflows of funds into China.
Estimates for export growth last month ranged from 5 percent to 18 percent. Economists projected import gains of 6 percent, based on the median forecast of 35 respondents, while the median estimate for a trade surplus was $15.15 billion.
The trade deficit was the first for a month not affected by the Lunar New Year holiday since March 2010. The shortfall “may send a strong signal” that strength in the yuan “can no longer be tolerated,” said Liu Li-Gang, chief Greater China economist at Australia & New Zealand Banking Group Ltd.
The central bank today set the yuan reference rate at 6.2548 per dollar, the strongest level since a peg ended in July 2005.
Gains in overseas shipments exceeded forecasts by at least 7.5 percentage points in December, January and February, the first time that’s happened in three straight months in the eight years Bloomberg has compiled analyst estimates for the data.
The government last month set a target of 8 percent trade growth this year, down from 10 percent in 2012. Zheng said today that he’s confident China can achieve the 2013 goal.
A weakening yen may also pose challenges for China’s exports, complicating the nation’s monetary policy, billionaire investor George Soros said this week at the Boao Forum for Asia in China. Japan’s currency has fallen about 22 percent against the yuan in the past six months as new Prime Minister Shinzo Abe steps up efforts to beat deflation.
“A depreciating yen has weakened the competitiveness of Chinese products in Japan,” Zheng of the customs agency said. Sales of labor-intensive products to Japan have already been affected as Chinese textile exports to the nation fell 3.9 percent in the first quarter from a year earlier, he said.
China Cosco Holdings Co., the nation’s biggest shipping company, on March 27 reported a wider-than-expected annual loss of 9.56 billion yuan ($1.54 billion) as dry-bulk rates slumped.
China’s economic expansion may have accelerated for a second period to 8 percent in the first quarter, according to the median estimate of analysts. The Asian Development Bank yesterday projected growth will pick up to 8.2 percent this year from 7.8 percent in 2012.
Elsewhere today in the Asia-Pacific region, an index of Australian consumer confidence fell 5.1 percent for April while South Korea reported a lower-than-estimated jobless rate of 3.2 percent for March.
The U.S. will see a report on mortgage applications after an index fell 4 percent in the week ending March 29 from a week earlier.