Hot money inflows, disguised as trade payments, distort numbers

China's trade surplus figures in the first four months of the year were over-inflated by hot money smuggled into the country to profit from interest rate differentials and investments in the real estate and financial sectors amid the yuan's appreciation, according to economists.

If the fake transactions, which were disguised as trade payments, are not taken into account, the real surplus for January-April was about $6 billion, about one-tenth of the official $61 billion figure, said Lu Ting, an economist at the Bank of America Merrill Lynch in Hong Kong.