From Capital Economics:
April’s low export growth was, as in previous months, largely caused by rampant over-invoicing of trade to avoid capital flows last year, which has created an artificially strong base for comparison.
These distortions appear to have resulted in exports to Hong Kong and Taiwan, via which most of the over-invoicing took place, contracting by 30% in y/y terms last month. In contrast, exports to the rest of the world grew 10.2% y/y, which suggests that external demand remains healthy, a view supported by strong export growth in Korea and Taiwan last month.
Import growth also recovered, from -11.3% y/y in March to +0.8% in April, but remains weak. (Bloomberg -2.1%; CE -2.0%). Import growth appears to have suffered from similar distortions with much of the weakness concentrated in imports from Hong Kong and Taiwan, which contracted 12.4% last month. That said, imports to the rest of the world grew by just 2.3%, which hints at a legitimate slowdown in imports.
…Looking ahead, healthy demand in external markets should continue to support exports. Moreover, because Chinese officials appear to have cracked down on over-invoicing around this time last year, the distortions that have pulled down headline export growth look set to fade. In contrast, we expect import growth to remain relatively weak as slowing property activity weighs on commodity imports. As a result, China is likely to continue to post large trade surpluses this year.
