Date
20 September 2017
Chinese firms and individuals are suspected to be manipulating trade invoices to move capital out of the country. Photo: Bloomberg
Chinese firms and individuals are suspected to be manipulating trade invoices to move capital out of the country. Photo: Bloomberg

China data fuels fresh worry about phantom imports

A steep rise in China’s reported imports from Hong Kong has sparked concern that trade invoices are being manipulated to take capital out of the country amid fears of further yuan depreciation, Bloomberg News reported.

Chinese trade data released Tuesday showed imports from Hong Kong jumped 89 percent in February from a year earlier, despite a decline in the nation’s overall exports and imports.

The spike in reported imports from Hong Kong followed similarly unusual patterns in recent months, suggesting that companies were using trade channels to pay for goods far in excess of their value or even which don’t exist at all, the report said.

“There has been a huge increase in payments,” Andrew Collier, an independent China analyst in Hong Kong and former president of the Bank of China International USA, told Bloomberg.

“The well-connected Chinese in state and private firms are using any tool in the shed to inflate overseas payments.”

China’s capital exodus accelerated through 2015 as investors were worried that policy makers will allow the yuan to weaken to cushion the nation’s economic slowdown. 

While China has strict rules on moving capital offshore, those seeking to evade limits can disguise money flows as payment for goods exported or imported to foreign countries or territories, especially Hong Kong.

Economists have said they suspect China’s December and January trade numbers were also skewed by this activity.

Over-invoicing for goods gives a company or individual the opportunity to skirt China’s capital controls and shift money offshore.

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FL/RC

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