Beijing crackdown fails to stem inflated invoicing on exports

Beijing's crackdown on fake trade seems to have made little difference as the recent surge in mainland exports of precious metals and jewellery and the discrepancy in Hong Kong-related trade figures signal the problem of inflated invoicing is back.

Mainland customs data showed exports of US$15.7 billion of precious metals and jewellery in the past two months combined, about four times what were exported in the same period last year.

However, a survey on the outlook for air trade through Hong Kong by the Hong Kong Productivity Council showed global demand for luxury goods including jewellery had seen a precipitous drop since the third quarter.

"Export growth was somewhat inflated by over-invoicing. [The mainland's] exports to Hong Kong, a segment where over-invoicing is typically most pronounced, rose 24 per cent year on year [last month], following a 34 per cent increase in September," said Shen Jianguang, an economist at Mizuho Securities Asia. "It's most likely related to exports of jewellery and precious metals."

Kevin Lai, an economist at Daiwa Capital Markets, echoed that point.

"Exports to Hong Kong [last month] still look too strong to us," Lai wrote in a note to clients.

"In September, [the mainland's] exports to Hong Kong were overstated by US$13.7 billion when compared with the same set of data reported by Hong Kong, meaning that [the mainland's] overall export growth in September was overstated by about seven percentage points."