UBS economists led by Hong Kong-based Wang Tao pointed to a "quite obvious discrepancy" in the growth of China's exports to Taiwan and South Korea and those economies' reported imports from China in recent months, even as historically they have tracked each other well.But to what end? Why would China exaggerate its export figures? Whom are they trying to fool?
It appears that there is an active trade in fake-exporting goods in order to benefit internal economy participants:
Shenzhen Global offers customs clearing and other freight services including a "one-day tour," Lin Yongtai, a manager with the company in the city bordering Hong Kong, said in a telephone interview.Note that this doesn't seem to be economic fraud perpetrated at the level of the State; rather, the skewed export figures appear to be at least partially generated by many small-scale fraudulent not-really-export activities. Businesses are paying intermediaries to gain an "export" credential for their goods, which in turn gives them some economic benefit in terms of tax relief or misleading origin of goods. This reminds me strongly of the UK VAT carousel fraud that was so profitable a few years ago.
For a fee of 1,000 yuan ($161) per vehicle per day, the company will drive trucks into warehouses in bonded zones, where cargo must clear customs, so that businesses can obtain a refund of value-added tax on the "export" of their products or boost sale prices for goods that carry the cachet of being imported.
What's worrying is the scale of this fraud, being able to move Chinese export figures sufficiently to make the figures obviously wrong. One has to wonder whether the Chinese government can actually exert any meaningful control over the economy they have encouraged; they can certainly arrest, try and jail/execute a few sacrifical goats, but if the government's stability is predicated on control of the economy then the only question is how long the government can keep all the plates spinning on their poles.