Decrease in China Hong Kong Trade and Investment Numbers

According to the latest numbers from Ministry of Commerce of PRC, in the first 4 months of 2014, the investment into Hong Kong from Mainland and exports from Chinese mainland to Hong Kong decreased largely.

However, the decrease in numbers doesn’t actually represent a real fall in trade, but a fall in hot money flows. In recent years, especially in 2013, there were hot money flows between Chinese Mainland and Hong Kong which were taking advantage of the RMB appreciation. Such flows were usually disguised as trade-related payments to evade regulation. Now, as the regulation both from China and HK gets tougher, the arbitrage opportunities using are becoming harder to find and hot money flows disguised as China Hong Kong trade and investment volume are decreasing.