Exports have been China’s primary growth engine ever since late 2020, when property and infrastructure construction started to lose steam. But even as global economic momentum has sputtered in 2022, China’s export growth has been resilient. Some of this strength can be attributed to a genuine expansion in demand from ASEAN countries and other emerging markets. But our analysis reveals three primary discrepancies in the data that suggest exports have been overstated in 2022, likely by around 10-15 percent:
• Companies over-reporting the value of exports in order to claim more export tax rebates. Actual export volumes are declining, and represent a drag on the economy.
• Record-high trade surpluses have not produced record levels of foreign exchange settlement or foreign exchange deposits.
• Reported Chinese exports to the United States are now much larger than reported US imports from China.
As a result, the export sector’s reported success has not corresponded to stronger industrial production, credit demand and most importantly, actual foreign exchange inflows supporting the currency.
