Eric Sprott: The Golden Answer To Chinese Import Data

Tyler Durden's picture


Submitted by Eric Sprott, Etienne Bordeleau, and David Franklin of Sprott Group,

Manufacturing data in the last several months has suggested that economic growth around the world is slowing. However, China’s export growth surprised the market this week and unexpectedly accelerated in April, even as shipments to the U.S. and Europe fell. This has created a conundrum for analysts and market watchers. How can China be growing while the countries that purchase its exports are slowing? The numbers don’t add up.

Digging deeper into these figures, several analysts have come to the conclusion that the numbers are faulty. Bank of America Corp. and Mizuho Securities Co. analysts have gone so far to say the figures have been inflated by fake reports. An “astounding” 92.9 percent jump in exports to Hong Kong, the most in 18 years, raises questions on data quality, researcher IHS Inc. said. They even call some of the data ‘absurd’, suggesting that exporters are ‘faking orders’ to obtain export-tax rebates. These observations challenge the credibility of Chinese economic data once again.

It is has been suggested that China’s robust appetite for commodities from iron ore to crude oil show that Chinese domestic demand is healthy, alleviating concerns about a renewed slowdown. China’s recent surge in gold imports puts this ‘increase in domestic demand’ observation into question. Our analysis shows that trade statistics are biased by the large gold inflows the country has experienced over the past few years. Because gold imports are accounted for in the “import” numbers of the current account (instead of the capital account like other investments), they artificially inflate the total import numbers published in the Financial Press. We say “inflate” because gold, unlike other materials, is mostly used for investment purposes and as such should not qualify as an import of “goods and services”, which is used to measure real economic activity. Now that China is importing significant quantities of gold, trade flow numbers are becoming more distorted.

When we strip out the ‘gold effect’, we find that 37% of the increase in imports over the last 12 months into China is due to the massive amount of gold that’s being imported. In Table A, gross imports increased by $82 billion, but $30 billion of this increase was from gold alone.  Put another way, more than one third of China’s import growth has been solely from its citizens’ desire to own gold and not from a growing domestic economy.

Table A

For the 12 months ending Gross Imports Gold Imports (tonnes) Value of Gold Imports Imports excl. Gold
  (USD Bn) (tonnes) (USD Bn) (USD Bn)
March 2012 1,772 546 32 1,740
March 2013 1,854 1,071 62 1,792
Change 82 525 30 52

Source: Bloomberg, General Administration of Customs (via Bloomberg), Census and Statistics Department – Hong Kong, Sprott Asset Management

Many analysts have attributed China’s increasing imports as signs of a healthy manufacturing sector, or increasing investments in infrastructure and property. Our simple analysis shows that more than one third of the increase in imports is due to China’s increasing gold consumption. We expect this will only increase in the near future when the explosion of gold buying in April is accounted for. New reports have suggested that Chinese housewives (affectionately known as ‘aunties’ according to the Beijing Daily newspaper) have purchased as much as 300 tons of gold in the past three weeks alone, worth almost $16 billion USD. This new gold buying could have a significant impact on Chinese import statistics and force analysts to reconsider the strength of the Chinese domestic economy.

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Sun, 05/12/2013 - 16:18 | 3554084 Aeternus
Aeternus's picture

It's only a matter of time until COMEX and LBMA run out of phyzz.

Sun, 05/12/2013 - 16:18 | 3554092 Motorhead
Motorhead's picture

Ag & Au, bitchez!

Sun, 05/12/2013 - 16:22 | 3554098 Room 101
Room 101's picture

Wait for it. 

Sun, 05/12/2013 - 16:39 | 3554137 BigJim
BigJim's picture

Aw Tyler, don't I get a "h/t"?

Sun, 05/12/2013 - 16:44 | 3554143 debtor of last ...
debtor of last resort's picture

See something, say something.... ;-)

Sun, 05/12/2013 - 16:52 | 3554156 James_Cole
James_Cole's picture

Hey Sprott, how are your ETFs doing? Good times am I right? Guess everyone is pretty stoked they can pay you guys high fees (let's be fair they are a bit high - but obviously worth it) to climb aboard the Sprott rocket to success. Not every etf manager can rack up a fantastic negative ~40% ytd. 

Keep up the good work, look forward to more hot stock picks like

Sun, 05/12/2013 - 16:59 | 3554170 Dr Benway
Dr Benway's picture

Here's one way for his funds to engineer some profits fraudulently, to make up for it.


Take flailing penny stock, inject enough money to control share price, ramp it 50% immediately, book 50% unrealized profit immediately. Check out Sprott Global's great investment in Birimian Gold.


Sun, 05/12/2013 - 17:05 | 3554178 James_Cole
James_Cole's picture

Sprott Asset Management's side business of conning investors into garbage penny stock exploration companies unfortunately doesn't work as well when applied to their ETFs. 

Sun, 05/12/2013 - 18:32 | 3554265 Pinto Currency
Pinto Currency's picture


These are the declared gold imports through Hong Kong.

Actual gold import levels are likely much higher. 

China is accepting gold as payment for goods delivered to Africa and other nations.

It also has undeclared physical off-take agreements with Australian miners, among others.

Sroll down at this link.  Where is the gold coming from?:

Sun, 05/12/2013 - 18:39 | 3554364 buyingsterling
buyingsterling's picture

People invest with Sprott because they trust him to store actual metal that they can have delivered. If you don't like it don't participate. As for the penny stocks, any time spent researching them and valuing them has to be backed by a fairly sizeable investment to warrant the hassle. In other words, stop crying because you don't own any physical metal. I'm sure you can load up when it tanks vs increasingly valuable fiat.

Sun, 05/12/2013 - 18:59 | 3554413 James_Cole
James_Cole's picture

People invest with Sprott because they trust him to store actual metal that they can have delivered. If you don't like it don't participate.

Whatever reason people are investing in his mutual funds it's certainly not performance lol

Sun, 05/12/2013 - 18:05 | 3554291 quasimodo
quasimodo's picture

Troll? Or are your etf's down -40% ytd?

Sun, 05/12/2013 - 21:15 | 3554747 BigJim
BigJim's picture

Christ, you are a dufus. Mark McGoldPrick... that was one of your previous aliases, wasn't it? We keep beating the shit out of you, but after licking your wounds you just have to come crawling back, don't you.

Can you please just give us a list of all the future aliases you have in mind? So we can down-arrow them without having to waste our time reading them.

Sun, 05/12/2013 - 21:15 | 3554758 akak
akak's picture

James Cole certainly is one committed anti-gold troll, whomever he may have been here earlier.

He certainly has the stink of a paid .gov shill and propagandist about him.


Sun, 05/12/2013 - 21:43 | 3554845 James_Cole
James_Cole's picture

Yes not only am I paid .gov shill I am actually head of the comex which is why I am CONSISTENTLY correct on the price direction of gold. Meanwhile Sprott + foolish commentators on here are CONSISTENTLY wrong.

Sprott loses 40% in his garbage ETF YTD and people on here love him, I am correct 8 months straight and people whine at me like little babies.

Reality sucks dont it!

Sun, 05/12/2013 - 23:40 | 3555146 fockewulf190
fockewulf190's picture

I take you invest in paper.  I used to do that years ago, but got sick of all the manipulation, fraud and flat out printing of fiat out of thin air. Now I stack phyzz as fast as I can convert this shit I´m being given for my hard earned work.  It would be great if I could trust the markets again, but they are hopelessly broken.  Maybe one day after the Great Reset.  Good luck to you.

Mon, 05/13/2013 - 00:47 | 3555260 James_Cole
James_Cole's picture

I take you invest in paper.  I used to do that years ago, but got sick of all the manipulation, fraud and flat out printing of fiat out of thin air. Now I stack phyzz as fast as I can convert this shit I´m being given for my hard earned work.  It would be great if I could trust the markets again, but they are hopelessly broken.  Maybe one day after the Great Reset.  Good luck to you.

Gold has proven to be a good long term investment century after century, naturally I think it's a good thing to have a portion of ones portfolio in.

However, like any market the pm market features prominent con-artists trying to take advantage of peoples ignorance. And there are certainly people with an unrealistic expectation of the market and a naiveté of how it functions so I advocate caution. That's it, not telling people to invest in 'paper' or sell their gold. My basic point is don't believe all the hyperbole and don't expect a quick turn around. 

People on here have very thin skin and consider even mild criticism to be totally unacceptable. 

Mon, 05/13/2013 - 02:53 | 3555361 akak
akak's picture

James, you come across here like a (slightly) more polite version of Jon Nadler, trying to ostensibly present yourself as the voice of reason, "caution" and moderation regarding gold, yet you continually misrepresent almost every aspect of its inherent function and value as a monetary asset.  Now why would anyone do that?

Mon, 05/13/2013 - 03:37 | 3555384 James_Cole
James_Cole's picture

yet you continually misrepresent almost every aspect of its inherent function and value as a monetary asset.

If you consider our odd disagreement over jewellery being a separate classification of gold demand to mean 'every aspect of its inherent function and value as a monetary asset' then yes.

Otherwise, I see the value of gold in a pretty non-controversial way - great hedge against inflation / store of wealth. 

My comments that make people angry on here generally involve me complaining about con men like Sprott or saying the story around physical shortage doesn't add up. 

All the same, I don't argue that those factors make gold a bad investment. It just means to me there are good and bad times to buy gold and that it should be seen on either a much longer timeline or as a much riskier investment than what the cabal of con artists suggest. 

Mon, 05/13/2013 - 05:11 | 3555445 silvermail
silvermail's picture

@ James_Cole

I've heard exactly the same arguments and reasons in 2008, when the price of gold fell from $ 1,000 to $ 700.
In 2008, I read these arguments and reasons from some eccentrics, but I laughed at them and buying gold and silver.
And right now I too read these arguments and reasons, I laugh again and I again buy gold and silver. LOL

Sun, 05/12/2013 - 16:24 | 3554104 Alpo for Granny
Alpo for Granny's picture

Come on Sprott...bust this thing won't ya?

Sun, 05/12/2013 - 16:29 | 3554115 jcpicks
jcpicks's picture

BTFD is meaningless now. Spot no longer has any association to physical.

Just buy the phyzz!

Sun, 05/12/2013 - 18:10 | 3554300 SpykerSpeed
SpykerSpeed's picture

Aaaaany day now!  Just you wait and see!  Only a matter of time!

That seems to be the theme of ZeroHedge and gold bugs.

Sun, 05/12/2013 - 18:30 | 3554345 nobodyimportant
nobodyimportant's picture


Sun, 05/12/2013 - 18:41 | 3554369 buyingsterling
buyingsterling's picture

Don't be hard on him. He spends all his time in the gym, waiting for results 'any day now'.

Sun, 05/12/2013 - 16:21 | 3554096 Rustysilver
Rustysilver's picture

So, all Chinese economic data is fake. Except for gold. Right!

Sun, 05/12/2013 - 16:35 | 3554126 duo
duo's picture

Damn near everything in the world right now is fake.

Our money, our food, tungsten in our gold, global warming and cooling at the same time, economic statistics, prices, interest rates, boobs, you name it.

I believe the Cs 137 from Fukushima is real, though.

Sun, 05/12/2013 - 16:57 | 3554165 Rustysilver
Rustysilver's picture


Your are saying that boobs are fake too. Damn.

Sun, 05/12/2013 - 19:57 | 3554547 duo
duo's picture

most of them, except in France

Sun, 05/12/2013 - 21:58 | 3554875 Rory_Breaker
Rory_Breaker's picture

The ones in Greece? Yes.

Mon, 05/13/2013 - 06:08 | 3555477 Cacete de Ouro
Cacete de Ouro's picture

All the trade stats for gold are 'masked' I would have thought.
For the UK and Switzerland they are at least. I haven't checked for other countries. It would be a full time job...someone can pay me and i'll do it...

For the UK:
the customs authorities and trade collection agencies collect monetary gold imports and export stats but they do not report them. Essentially they report rolled up trade categories but the individual gold category is not reported. To prevent anyone calculating the missing figure by adding up all other categories, they 'mask' and do not report othed categories, so its impossible to goal seek or reverse engineer the data.

This is all done at the request of the Treasury and the Bank of England, in 'the national interest', because old boy we can't have anyone knowing how much gold is flowing in and out of London, you understand..

Mon, 05/13/2013 - 07:59 | 3555630 jerry_theking_lawler
jerry_theking_lawler's picture

i'm OK with fake boobs. party on.

Sun, 05/12/2013 - 16:40 | 3554138 BigJim
BigJim's picture

 So, all Chinese economic data is fake. Except for gold. Right!

Only the Chinese stuff is ersatz. If you've got any data from a Western gub, it's the Real McCoy. 101% !

Sun, 05/12/2013 - 16:52 | 3554160 Rustysilver
Rustysilver's picture


I am in US. All data and statisitics from any .gov in the west as well as in east is as real as Chinese lamb.

Sun, 05/12/2013 - 19:15 | 3554444 Jendrzejczyk
Jendrzejczyk's picture

With so few simple pleasures left, you had to ruin Chinese lamb. ;[)

Sun, 05/12/2013 - 21:09 | 3554741 BigJim
BigJim's picture

Chinese lamb is real!

Admittedly, their lambs are unusually small... and have hairless tails... but they ARE real!

Make me laugh! 

Mon, 05/13/2013 - 05:12 | 3555446 BigJim
BigJim's picture


I am in US. All data and statisitics from any .gov in the west as well as in east is as real as Chinese lamb.

Sorry, my bad. I should have said 153.127% real. 

Sun, 05/12/2013 - 18:37 | 3554357 DeadFred
DeadFred's picture

Fake data makes one wonder about this calculation as well. The 37% figure assumes the data is real but most likely the Chinese would under report gold and over report other economic numbers meaning the 37% could be a gross underestimate. War is coming and China will likely be involved. The ramp up across all commodity types has an end game feel to it in my estimation. Could be an interesting summer manuevering season.

Sun, 05/12/2013 - 16:28 | 3554108 observer007
observer007's picture


Gerald Celente comments on gold market rigging, among other things. Celente says: "Why aren't gold and silver prices going up? They should be. Everyone knows that game is rigged. I believe that the Federal Reserve and the other central banks are manipulating the prices to keep interest rates low."

Sun, 05/12/2013 - 18:35 | 3554351 nobodyimportant
nobodyimportant's picture

Gerald Celente -- smart guy - right?  Then how in the hell did he get ripped off by GF Mobile?

Playing the leverage game by someone who should have known better!

Sun, 05/12/2013 - 19:51 | 3554529 Tinky
Tinky's picture

He liked it because it rhymed with "MF Global". Can you blame him?

Sun, 05/12/2013 - 16:29 | 3554113 JumpinJonnyK
JumpinJonnyK's picture

I just keep buying gold and silver every couple months.  Not worried about the price right now, because it's going to go higher in the future (at least I think).  I was a buyer of junk silver coins for silver but the premiums are REALLY high right now (here's the best silver calculator I have found )  Im thinking about buying 10 oz silver bars to save money on premium was wondering what some people think about this idea. 

Sun, 05/12/2013 - 18:09 | 3554297 Likstane
Likstane's picture

They sink faster, but they are easier to find.

Sun, 05/12/2013 - 18:12 | 3554310 Room 101
Room 101's picture

You need to look at the spread.  What can you buy for (cheapest dealer) vice what you can sell for (most generous dealer). The 10 Toz bars are pretty good right now; about a .50 spread/per Toz.

Sun, 05/12/2013 - 16:29 | 3554116 forwardho
forwardho's picture

 Its a hard.

Its a hard.

Its a hard rain gonna fall.

Sun, 05/12/2013 - 16:31 | 3554120 RaceToTheBottom
RaceToTheBottom's picture

Chinese understand the historical role of Gold.

It will take a while for thier hubris to match that of WS Scum

Sun, 05/12/2013 - 16:32 | 3554123 Kirk2NCC1701
Kirk2NCC1701's picture

How many gold mines does Eric own up there in the Great White North?  Or anywhere else?  Which ones?  I know I would, with his 'fiat'.

Sun, 05/12/2013 - 16:33 | 3554124 W T F II
W T F II's picture

Gold will go still lower in front of NWO...then buy...!!

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