On the surface, China's capital outflows were only $30 billion in May, far below the $100 billion clip seen earlier this year.
So all is well in China? Not quite. We have seen that anecdotally people still strap cash around their waists and try to smuggle it across the border.
Chinese companies still make strange acquisitions to be able to move capital to other countries, like a home appliance maker buying an Italian soccer club.
Another statistic is quite telling that not all is as it seems. Chinese imports from Hong Kong skyrocketed 242 percent in May compared to last year and 21 percent compared to last month.
Why is this strange? Because Hong Kong exports to China (exactly the same thing, except that it's a different agency reporting the numbers) have been falling this year, like 4.8 percent year over year in April. Also, total imports including Hong Kong were down 10.3 percent over the year.
"Another interesting contrast is the trade data of Hong Kong, though it has not come out for May yet, Hong Kong exports to China has contracted for 12 months when for most of the time China imports to Hong Kong was rising," wrote investment firm Natixis in a note to clients.
The discrepancy is literally off the charts. So how can this be? Most analysts agree that Chinese companies hand in fake invoices to the regulator so they can wire money to Hong Kong and circumvent the limits on outbound money flows.
"The over-invoicing of imports, particularly via Hong Kong, remains a source of capital flight, though it only accounts for around 2 percent of total imports," the International Institute of Finance (IIF) wrote in a note.
In the past and during the time when China accumulated its vast stash of foreign exchange reserves ($4 trillion at the peak in 2014), this flow was reversed and exports to Hong Kong from China were rising while Hong Kong imports from China were stable.
"The China-Hong Kong trade is a channel of speculative flows. We called these flows 'speculative' because these flows ride on the trend of the yuan movement and brought capital into China when the yuan appreciated. It is logical that the reverse happens now as the yuan depreciates," wrote Natixis.
According to Natixis, trading companies in Hong Kong and the mainland partner with commodity companies dealing in scrap metal and scrap plastic. "The goods do travel across the borders although the value of the goods could be in question."
Given the discrepancy in what essentially should be the same number, there is no question the value of the good is inflated to funnel money out of the country. According to Natixis, this could even be beneficial for regulators:
"For regulators, knowing the existence and the size of speculative flows is better than closing down the channel and knowing little about a black market."
Follow Valentin on Twitter: @vxschmid
