China's Exports Spike But Data Unreliable
Sober Look | Nov 09, 2014 01:34AM ET
Yesterday’s trade report out of China showed stronger than expected export growth, with trade surplus grew by 24% YoY. This is indication that the export data may once again be suspect. With China’s currency appreciating against the dollar since June, it is likely that some exporters were placing FX bets (long CNY, short HKD) disguised as export proceeds.
There is little evidence of renewed export-driven economic acceleration. Market indicators from China continue to show growth moderation. Here are iron ore prices at China’s ports (via Jan 2015 iron ore futures).
Moreover, the yield curve remains inverted with longer-dated rates declining - an indication that the market is not betting on strengthening growth.
It is possible that China may once again begin to depreciate the yuan (as it did early this year) in order to keep the real exports humming while shaking out some of the speculative FX trading activity.
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