I posted on this back here: China trade balance for March: +$7.7bn (expected is +$1.8bn) – MORE ADDED!

i.e.:

ADDED: … Note …

  • China March exports to Hong Kong & Taiwan fell 42% due to over-invoicing a year ago
  • Exports to the rest of the world were +8%

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The FT now (Fast FT):

China’s strict controls on moving foreign currency into the country prompted traders who wanted to take advantage of the rising renminbi to do odd things such as falsify exports and import mountains of unnecessary copper.

The People’s Bank of China, which keeps an iron grip on the domestic currency, has been pushing it lower to stop these illicit carry trades.

And that, according to ANZ’s Liu Ligang and Zhou Hao, is basically why exports look awful.
They write, in no uncertain terms:

China’s export growth registered a negative growth for the second straight month in March, falling by 6.6% y/y versus -18.1% y/y in February, reflecting that [the] PBoC’s ‘double intervention’ in both FX and rate markets to counter ‘hot money’ inflows has taken effect.

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Fast FT is gated

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Also, from Wall Street Journal:

“Do not worry about the export data,” wrote Louis Kuijs, an economist at RBS in Hong Kong, in a note to clients.

RBS estimates year-on-year export growth in March 2013 was inflated by 11.8 percentage points due to over-invoicing. The bank also thinks export growth on-year in March this was 5.2% adjusting for over-invoicing.

“The competitiveness of China’s manufacturing sector is still solid, allowing its export sector to benefit from global demand growth,” Mr. Kuijs wrote.

And:

Andrew Tilton, an economist at Goldman Sachs in Asia, agreed with this assessment.

“The main reason is that the over-invoicing distortions were peaking last year around this time,” he said. Now, “the increased currency volatility and deprecation is discouraging that activity from a financial incentive perspective.”

Goldman believes underlying export activity is “marginally positive,” he added. (Imports were also lower in March – down 11.3% on year versus economists’ forecasts of almost 3% growth. Mr. Tilton said imports also may have been distorted by the invoicing issue.)

It ain’t all sunshine and lollipos, though:

Still, both economists say the growth outlook for China, which is targeting 7.5% expansion this year, remains fragile.

The Wall Street Journal is also gated: China Export Woes Point to Trade Distortions