The Chinese trade balance data was outstanding as exports are much higher then expected, yet there are questions into the legitimacy in these numbers as they are not easily accessible to the public. After December numbers show a sharp decline in manufacturing, the $31.9 billion trade surplus surprised as analysts were looking for $24.2 billion, a drop from the previous month’s $25.6 billion surplus.
Analysts are worried that China is, again, forging numbers to hide the worsening economic climate. There is an expectation that the figures are inflated by false trade transactions ahead of the Lunar New Years holiday in order to get cash past capital controls. Chinese exports jumped 10.6 percent in January, year-over-year, which is much higher than the two percent forecasts – over five times more.
Imports accelerated, as well, with a 10 percent increase, year-over-year. China purchased record volumes of crude, copper and iron ore, and this lifted import growth to levels not seen since last July. Imports came in over thrice more than analysts were expecting. Zhang Zhiwei, an economist at Nomura, said “we find this strong level of export growth puzzling.”
The lengthy Lunar New York often disguises economic trends in the beginning of the year, so it could be months until economists truly know the growth path China is actually on. The suspect numbers come after a terrible showing in economic data last month, and four purchasing managers indices show, in January, that export and domestic orders are falling.
China has been caught red-handed faking export data to Hong Kong in the past, but in January exports to Hong Kong dropped 18 percent opposed to a 2.3 percent rise in December. It is quite possible, as I have believed over the last few years, if that China purchases mass quantities of raw materials to put on a facade of economic growth.
Until there is full transparency, it will remain difficult to determine China’s true growth trajectory.