Salient to Investors:

Economists expect China to report an 11.7 percent growth in exports and a 6 percent rise in imports. In each of the previous three months, exports have come in at least 7.5 percentage points above what economists had predicted. While China has reported stellar numbers, neighbors South Korea and Taiwan have seen exports decline.

Zhu Haibin at JPMorgan Chase says the recovery in exports is there, but the magnitude is much weaker than official data indicates. Alistair Thornton at HIS says the figures look too weird.

Zhang Zhiwei at Nomura says export growth sounds too strong for him. Zhang and Wendy Chen at Nomura said it is possible that some of the trade flow disguised capital inflows allowing trading companies to overstate exports and understate imports to circumvent capital controls and bring capital into China. With weaker export growth from both Korea and Taiwan, the Nomura economists had expected China’s trade data to follow suit.

Tao Wang at UBS says that in 2012 the numbers that China reports as exporting to Hong Kong and what Hong Kong says it imports from China diverged – up to then the numbers followed very closely. Wang says actual exports may be several percent below official figures, though Chinese exports are recovering, driven by the recovery in the US economy. In addition, Wang says it is easier for companies to get tax rebates through bonded zones.

Louis Kuijs at Royal Bank of Scotland says usually bonded areas don’t matter very much and would not contribute more than 1 percent to export growth, but in half2 2012, their contribution grew to 5 percent and to 7 percent by the end of February 2013. Kuijs estimates that February’s export numbers may have been overstated by 7 percent.

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