CEIC News@lert: China’s Exports to Hong Kong Skyrocketed During the First Half of 2013

December 5, 2103 HIGHLIGHTS According to figures from China’s Customs Statistics, the value of China’s exports to Hong Kong (also referred to as “China data” hereinafter) has been on a significant upward trend since late 2012, growing at a rate of more than 30% year-on-year (yoy) from September 2012 to April 2013. This trend peaked in March 2013 when China data increased by 93% yoy, which attracted the attentions of news media across the world. Interestingly, this dataset can be compared to the figures published by the Hong Kong Census and Statistics Department concerning Hong Kong’s imports from China (also referred to as “HK data” hereinafter), which in theory should match the China data, as it forms the other side of the same equation. That this is not the case, as can been seen in the data since November 2012 where China data has exceeded the HK data by more than 40%, has generated a lot of conjecture in the market, especially when such differences escalated to an unprecedented 135% in March 2013. China has long been a major trading partner of Hong Kong. Based on the HK data, China has accounted, on average, for 46.3% of Hong Kong’s total imports over the past five years from September 2008 to September 2013. This is calculated by the average ratio over the period using the following formula:
Hong Kong's Imports from China (HK Data)/Hong Kong's Total Imports

The blue line in the chart (below) shows that the fluctuations in this ratio were relatively small over the past five years. To look at the trend from another perspective, the numerator can be substituted by China data in the following formula, which is represented by the red line in the chart:
China's Exports to Hong Kong (China data)/Hong Kong's Total Imports

By using this method, China’s percentage share of Hong Kong’s total imports would have been more volatile over the period. The percentage calculated by this formula reached 110% in March 2013, implying a large discrepancy between China data and HK data. It was suggested from the media coverage that the increased differences between September 2012 and April 2013 arose possibly from the use of exports and imports of goods as a channel to inject and withdraw huge amounts of capital in and out of China’s financial market, in order to enjoy the higher rates of return on investment from Chinese assets, including bonds, equities and real estate. In order to do so, it was mentioned that a huge number of high-value exports and imports such as pearls, precious stone and metals are nominally made to/from Hong Kong. However, these goods have never physically entered Hong Kong. Instead, they have been transported to one of the tax-free bonded processing zones; these trades are recorded by China’s customs as exports, but are unlikely to have been recorded by the Hong Kong authority. Further investigating into data on China’s exports to bonded zones, it appears that for the same period, from October 2012 to April 2013, obvious spikes were observed in exports to Shenzhen bonded zones, which have land borders crossing into Hong Kong. The value of exports to other bonded zones, on the other hand, was steady, accounting for a low proportion of total exports to all bonded areas. However, exports reverted to normal values in May 2013, and the yoy growth rates since then have been below 10%, with China data exceeding HK data by slightly less than 40%. China’s total exports to the bonded areas of Shenzhen dropped significantly in May 2013, coinciding with the tightening in policy stance towards credit and real estate market by Chinese authorities. Discuss this post and many other topics in our LinkedIn Group (you must be a LinkedIn member to participate). Request a Free Trial Subscription. Back to Blog
6th December 2013 CEIC News@lert: China’s Exports to Hong Kong Skyrocketed During the First Half of 2013