On January 18, Vice Minister of Commerce Gao Hucheng said at the signing ceremony, “China's strong trade surplus will continue until the middle of this century.”

Later, Li Deshui, director of National Statistics Bureau said, “China's trade surplus is not as large as it is reflected. Exchange speculation and Rebate fraud by some enterprises caused distortion in China's foreign trade surplus.”

In 2006, China's foreign trade surplus was nearly US $177.5 billion, an incredible growth of 74 percent over 2005.

Li Deshui cited the data by Wang Zhi Hao, a senior foreign analyst from the Standard Chartered Bank of UK, China's trade surplus in 2005 was less than $102 billion as publicly released. The actual trade surplus was $35 billion, and Wang called the remaining $67 billion as ‘non-trade inflow hidden in foreign trade’, which accounted for 65 percent of the total trade surplus.

"It is hard to give an exact figure as how large the final real figure of China's trade surplus is.” Wang started to study real data of trade surplus a few years ago.

One phenomenon caught his attention that according to Chinese Customs statistics “there are a large amount of exported goods registered. However, the statistics of the eight countries trading with China indicate that these countries have not received the goods with such high volumes.” This shows China's exporters may have presented false export reports to the Customs. The purpose of doing so is to help increase the export tax rebate and the return of foreign capital to enter China under the name of trade payments.
Sources disclosed, "In fact, for traders and export enterprises, making false reports has long been familiar activities with them. The larger the export province, the more serious situation is for suspected export amount, and the more difficult to detect.” In Guangdong, Fujian, Zhejiang, Shanghai, there are some companies specialized in series false export procedures to help enterprises boom their business. The Customs is difficult to detect the suspected exports dealt by these specialized companies.

It is learned that the initial purpose for enterprises to falsify exports is mainly to cheat export tax rebate from the state. The source said: "with the daily increasing competition in export of textile products and clothing industry, this phenomenon is widespread."

To increase the amount of export tax rebate, export enterprises usually inflate the amount of export products, and the associated value-added tax invoices have to be fraud, too. "If the value of products exported to the US was $100,000, then they would declare $300,000 to the Customs, in this way, rebate would add to the more than $20,000.” he explained.

After the exports, "The false reported $200,000 would be converted into RMB by those foreign funds through the accounts of Chinese traders and eventually enter Chinese market.

"These foreign investors could invest into China's stock market, real estate speculation. Now, the demand for foreign capital to enter Chinese market has been larger than the demand China's enterprises for export rebate fraud, as the exchange between US dollar and RMB can be smoothly achieved through such means.”
So it has become one of the ways to speculate on RMB exchange rate. Wang's survey also shows that once RMB is appreciated, there will be a lot US dollars converted into yuan and inflow into Chinese banks under the name of foreign trade payments.

For export enterprises and foreign funds, this is benefited to both sides.

Xie Fuzhan, director of the State Statistics Bureau, said, “The big trade gap between China and the US has been generated from both economic reasons and inconsistent statistics between the two countries, it is necessary for the two sides to work together in various aspects to address the problem.”

 
Fibre2fashion, News Desk - China