Currency Carry Trade by Trucks: The Curious Case of China's Massive Imports from Itself
With capital controls, the standard financial market transactions needed for currency carry trade are hard to implement. Using detailed trade data reported by both the mainland Chinese and Hong Kong’s governments, we present evidence that indirect currency carry trade likely takes place via round-trip reimports. We also show that greater state control in terms of more state-owned firms does not reduce such “carry trade by trucks.”
We thank Zhiguo He and two anonymous referees for helpful comments. We thank Leo Dai for excellent research assistance. All remaining errors are the responsibilities of the authors. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.