China’s Trade Surplus Not All Real?

Author Chinavasion Marketing 30.1.2007. | 17:34

A discussion about China’s Renminbi (RMB / CNY) currency policies inevitably involves discussion of China’s heavy imbalance of exports:

According to customs statistics, China’s trade surplus swelled by 74% last year to US$177.5 billion from $102 billion in 2005, boosting the country’s foreign reserve to well over $1 trillion by end of last year.

But an Asia Times article is reporting that there could be a bit of good old Chinese governmental book-cooking going on, and it’s the government spokesman saying this!

Li Deshui, the outspoken former chief of the National Bureau of Statistics (NBS), recently remarked that a considerable part of China’s trade surplus is not real, but in fact comes from “fake” exports by enterprises that fraudulently obtain export rebates from the government. Hence, he argued, the yuan’s appreciation may not effectively curb the growth of the trade surplus, and it is more important for the government to strengthen its management and supervision of foreign trade.

Why fake exports? It’s a taxback fraud scheme, impressively executed on a grand scale in China:

A popular practice is to export certain goods to get tax rebates and then smuggle or import the goods back to sell in the domestic market. In the first eight months of 2006, about $447 million worth of domestically made goods were “exported” and then “imported”, according to the General Administration of Customs. The amount of smuggled in “exported” goods could be much larger, though it is difficult to calculate.

What sort of margin of error does this mean?…

Green said the actual trade surplus in 2005 was probably only $35 billion after the deduction of false export claims and concealed non-trade capital inflow, which could total $67 billion.

One could be forgiven for drawing the global conclusion that it is impossible for anyone to calculate any real economic figures for China’s uniquely messy economy!

The full Asia Times article is here:

Author Chinavasion Marketing 30.1.2007. | 17:34
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