March 9, 2016
Days after the Switzerland-based Bank for International Settlements played down fears over capital flight out of China, new trade data has put the spotlight on a channel used to ferret out billions worth of illicit money flows: phantom goods.
A steep rise in China’s reported imports from Hong Kong has raised concerns that trade invoices are being manipulated to get capital out of the country amid fears the yuan will continue to weaken. February data released Tuesday show those imports jumped 89 percent from a year earlier, even as total imports fell 14 percent. While the rise wasn’t as great as in January, economists said the spike follows similar patterns in recent months that point to companies using trade channels to pay for goods far in excess of their value or even that don’t exist at all.
There has been a huge increase in payments,” said Andrew Collier, an independent China analyst in Hong Kong and former president of the Bank of China International USA. “The well-connected Chinese in state and private firms are using any tool in the shed to inflate overseas payments.” China’s capital exodus accelerated through 2015 as investors worried that policy makers would allow the yuan to weaken to cushion an ongoing slowdown in the $10 trillion-plus economy. The People’s Bank of China has insisted it isn’t contemplating a big change in currency policy and spent billions of the nation’s foreign exchange reserves defending the yuan’s value.