Fake invoice evidence mounts as HK trade gap widens

The gap between the Chinese mainland's reported exports to Hong Kong and the city's imports from the mainland widened in September to the highest level this year, suggesting that fake export-invoicing is again skewing trade data.

The mainland recorded $1.56 of exports to Hong Kong last month for every $1 in imports Hong Kong registered, leading to a $13.5 billion difference, according to data compiled by Bloomberg.

Hong Kong's imports from the mainland climbed 5.5 percent year-on-year to $24.1 billion, figures showed; the mainland's exports to Hong Kong surged 34 percent to $37.6 billion, according to mainland data released on Oct 13.

While the Chinese government has strict rules on capital inflows, those seeking to exploit yuan appreciation can evade the limit by disguising money inflows as payment for exports to various markets, especially Hong Kong. The latest trade mismatch coincided with renewed appreciation of the yuan, leading analysts at banks and brokerages including Everbright Securities Co and Australia & New Zealand Banking Group Ltd to question the export surge.

"This is definitely another important piece of evidence of over-invoicing exports to Hong Kong to facilitate money inflow into the mainland," said Shen Jianguang, chief Asia economist at Mizuho Securities Asia Ltd in Hong Kong. "So we shouldn't be too optimistic about recent export data from China."

Doubts over the statistics raise broader concerns, as a surge in exports was believed to have underpinned economic growth in the third quarter. Shen said that the nation's economic outlook is "challenging" and more easing is "necessary".

Data on Tuesday added to evidence of moderating economic growth. Industrial profits rose 0.4 percent in September from a year earlier, following a 0.6 percent decline in August - the weakest two months since mid-2012.

Although a rapid increase in luxury goods shipments suggests that some of the exports to Hong Kong should be attributed to capital inflows, exports of processed goods including Apple Inc's iPhone drove the September surge, said Hua Changchun, a China economist at Nomura Holdings Inc in Hong Kong.

"The fake invoicing problem is not as severe as last year," Hua said.

Worries about distortions had abated this year after a government crackdown and as the yuan dropped.

Companies have "faked, forged and illegally re-used" documents for exports and imports, Wu Ruilin, a deputy head of the State Administration of Foreign Exchange's inspection department, said at a news conference in Beijing last month.

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