CHART OF THE DAY: Explaining The Complete And Utter Collapse Of Chinese 'Exports' To Hong Kong

China's exports to Hong Kong grew just 7.7% in May, down from 57.2% in April and a whopping 92.9% in March. Overall exports grew just 1%.

Why the huge drop?

At the time of the big gains earlier in the year, analysts said it was because the export data was "the result of disguised capital inflows, as exporters could overstate export amount in order to move yuan into the mainland."

On May 5, the State Administration of Foreign Exchange (SAFE) announced that it would crack down on companies that used "merchandise trade invoices for arbitrage activities, and announced the introduction of strict limits on how much onshore banks can short or lend the US dollar," wrote Societe Generale's Wei Yao.

The sudden collapse reflects the effectiveness of the government's crackdown on disguised arbitrage flows.

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