China Export Surge Spurs Data Skepticism at Goldman, UBS
China’s unexpected surge in exports last month renewed concern from analysts at Goldman Sachs Group Inc., UBS AG and Australia & New Zealand Banking Group Ltd. (ANZ) that statistics from the nation can be unreliable.
The 14.1 percent jump from a year earlier was the biggest positive surprise since March 2011, according to data compiled by Bloomberg. The increase didn’t match goods movements through ports and imports by trading partners according to UBS, while Goldman Sachs and Mizuho Securities Asia Ltd. cited a divergence from overseas orders in a manufacturing index.
Smaller trade gains could signal a less robust recovery from a seven-quarter slowdown just as Australian Treasurer Wayne Swan says the economic rebound is a sign of improving global demand. Accurate statistics from the world’s second-biggest economy are increasingly important for domestic and foreign investors and for China’s government, ANZ’s Liu Li-Gang says.
“China’s influence on the global economy has become bigger, so not only Chinese policy makers but also business people and the rest of the world need better data,” said Liu, Hong Kong- based chief economist for Greater China, who formerly worked for the World Bank. “Unreliable data could have a negative impact on resource allocation and business planning.”
The Beijing-based customs administration, which reported the December trade figures on Jan. 10, said it couldn’t immediately respond to a faxed request from Bloomberg News for comment on the banks’ skepticism.
The Shanghai Composite Index, China’s benchmark stock gauge, rose 3.1 percent after the head of the securities regulator said the nation can increase the amount foreigners can invest in Chinese securities.
China’s economic growth may have recovered to 7.8 percent in the fourth quarter from a year earlier, after sliding to a three-year low of 7.4 percent in the previous period, according to the median estimate in a Bloomberg News survey ahead of the data release on Jan. 18.
Evidence that China’s economy “appears to be stabilizing” is “one cause of optimism” that global demand will improve this year, Swan said in his weekly economic note yesterday. China is Australia’s largest export market.
The median forecast for China’s December exports in a Bloomberg survey of 40 economists was for a 5 percent gain, with the highest estimate at 9.2 percent, after November’s 2.9 percent growth. Goldman Sachs, ranked by Bloomberg as the most accurate forecaster for the indicator, projected a 7 percent rise.
The increase, which was the biggest since May, could indicate exporters’ rush to finish year-end orders and government pressure to report exports before the end of the year to reach the official 2012 target of 10 percent growth, Shen Jianguang, Mizuho’s Hong Kong-based chief Asia economist, said in a Jan. 10 note.
“It is possible that local governments may have tried to boost exports data by either making round trips in special trade zones” or by exporting “earlier than otherwise in an attempt to improve the annual exports data,” Goldman Sachs’ Beijing- based economists Yu Song and Yin Zhang wrote the same day.
Rushed shipments and even faked exports to secure tax refunds may have contributed to the stronger growth data, according to Alistair Thornton and Ren Xianfang, Beijing-based analysts at IHS Inc. (IHS)
UBS economists led by Hong Kong-based Wang Tao pointed to a “quite obvious discrepancy” in the growth of China’s exports to Taiwan and South Korea and those economies’ reported imports from China in recent months, even as historically they have tracked each other well.
A sub-index tracking new export orders as part of the government’s manufacturing purchasing managers’ index was at 50 in December, the dividing line between expansion and contraction and down from 50.2 in November.
Elsewhere in the Asia-Pacific region, a private gauge of Australian inflation advanced in December on costlier gasoline, travel and rent while home-loan approvals unexpectedly fell in November for the first time in four months.
Indian inflation slowed to the lowest level in almost a year in December, boosting scope for a reduction in interest rates to revive the economy. The wholesale-price index rose 7.18 percent from a year earlier.
In Europe, a report may show euro-area industrial production fell in November from a year earlier for a 13th month, according to a Bloomberg survey.
ANZ’s Liu and colleague Louis Lam published research last week that underscored doubts about the quality of China’s economic data. They found that quarterly GDP, industrial production, fixed-asset investment and inflation data published in percentage terms failed to conform to “Benford’s Law,” which holds that in any series of numbers certain patterns will be found only if the statistics are naturally generated.
Li Keqiang, who may succeed Wen Jiabao as premier in March, was quoted in 2007 as saying he watched figures on power, rail cargo and loans because gross domestic product numbers were “man-made.” Li’s remarks were in a U.S. diplomatic cable published by WikiLeaks in late 2010.
After China’s statistics bureau reported third-quarter GDP in October, Standard Chartered Plc analysts said the 7.4 percent increase was “too good to be true” when compared with the slowdown in electricity production and the readings of a manufacturing index, while London-based Capital Economics Ltd. said its own analysis indicated expansion of about 6.5 percent.
Some trading companies are turning to transportation providers like Shenzhen Global Express Logistics Ltd. for help in shipping goods through so-called bonded zones to claim export tax rebates or charge higher import prices for goods without them physically leaving the country.
Shenzhen Global offers customs clearing and other freight services including a “one-day tour,” Lin Yongtai, a manager with the company in the city bordering Hong Kong, said in a telephone interview.
For a fee of 1,000 yuan ($161) per vehicle per day, the company will drive trucks into warehouses in bonded zones, where cargo must clear customs, so that businesses can obtain a refund of value-added tax on the “export” of their products or boost sale prices for goods that carry the cachet of being imported.
“A poor villager can boast he has thousands of yuan of turnover every day, but people later discover he only has one bull -- he takes the bull out every morning and brings it back every evening,” Lin said. “The same applies to some parts of China’s foreign trade.”
Such practices aren’t unknown to the customs administration. In March 2009 it issued a statement that “some local governments and enterprises” were trying to move goods in and out of bonded zones to inflate their export and import numbers and said such shipments would not be included in official data.
--Nerys Avery, Zhou Xin. With assistance from Sharon Chen and Rina Chandran in Singapore. Editors: Scott Lanman, Sunil Jagtiani