HONG KONG: China’s headline figure for dollar-denominated imports got a boost last month, if only a small one, from a record surge in the value of shipments from Hong Kong – likely the result of over-invoicing to mask capital outflows.
Imports from Hong Kong were up 242.6 per cent year on year in May according to calculations based on statistics from the General Administration of Customs, writes Hudson Lockett.
“It’s been very high for a number of months but it keeps climbing up,” Julian Evans-Pritchard, China economist with Capital Economics, told the Financial Times. He estimated the growth in Hong Kong imports last month was the fastest rate on record based on customs data going back to 1994.
“Obviously that’s not underlying demand,” Evans-Pritchard said. “I think it probably has more to do with capital flows than anything else.”
China’s foreign exchange reserves dropped by $28bn in May, falling to their lowest level since the end of December 2011 but in line with a broader trend of stabilisation as Beijing continued its efforts to stem capital outflows.
Where imports from Hong Kong accounted for 0.6 per cent of all China’s imports in May 2015, last month that share had more than tripled to 1.9 per cent, according to customs data.
However, the relative size of imports from Hong Kong – even at their recent, unusually high levels – ultimately has only a small impact on China’s headline figure for dollar-denominated imports.
Evans-Pritchard estimated that Hong Kong’s import growth contributed only 0.4 percentage points to the headline import figure’s change from April’s reading of -10.9 per cent to -0.4 per cent in May.
