Hu Liren: Xi Jinping issues important instructions regarding the western region once again! Hard to conceal his fear of war.

Observe things as they are, reject fragmented understanding.

The Chinese Communist Party (CCP) has now completely turned data into a political engineering project, so to speak.

A couple of days ago, I carefully looked at some data: the General Administration of Customs of the CCP released the May foreign trade data, and the numbers were dazzlingly pretty, almost blindingly so.

Total monthly import and export value reached USD 648.13 billion, of which exports were USD 376.78 billion, a year-on-year increase of 19.4%, hitting another historical high; imports were USD 271.35 billion, an increase of 27.4%; the monthly trade surplus reached USD 105.43 billion.

Everyone might be very confused, and I am very confused too. Isn't the whole world shouting about decoupling risks? But China's exports are hitting record highs again, and the trade surplus is outrageously large. The CCP's whitewashing is very smooth, and it has started spouting nonsense like "Made in China is irreplaceable."

Fine, doesn't the CCP love export data? Today, let's use high-purity makeup remover to wipe off this layer of powder on the CCP's face. After wiping, let's see whether this creature is human or a ghost.

Today, we will use a full set of forensic accounting tools to peel back the USD 376.8 billion that the CCP is bragging about, layer by layer, to see how much of it is water and how much is substance.

Let's state the conclusion first: after squeezing out the water, according to my most conservative estimate, China's real export scale in May was roughly between USD 310 billion and USD 329 billion.

How was this number calculated? The water is hidden in three pockets, and we will talk about them one by one.

First, let's break down the total volume to see what on earth is hitting record highs.

In the first five months, exports of high-tech and high-value-added mechanical and electrical products grew by 18.4%, accounting for 63.6% of the entire export value. Breaking it down further, there are actually only two real engines.

The first engine benefits from the capital expenditures of US tech giants. In May, automatic data processing equipment, meaning servers and commercial computers, saw exports reach USD 26.89 billion, a year-on-year increase of 6.1%, which is also a new high.

There are also primary integrated circuits, with monthly export values increasing by 110.9% year-on-year, an increase of 10.8 percentage points compared to the previous month.

Note that some institutions estimate that these two categories of goods alone drove the overall export growth rate in May by 9.4 percentage points, contributing more than half of the month's export increment.

What concept is this? That means half the table of China's so-called export prosperity is entirely AI.

The second engine is equipment. Exports of new energy vehicles grew by 43.1% according to the CCP's standards, with the value increasing by 39.3%. The second item is lithium batteries, which accumulated a growth of 47.5% in the first four months. Ranking third and growing relatively fast are ships, with an increase of 31%.

In the entire month of May, the overall export of high-tech products grew by 5.29%, accounting for 29.8% of all exports.

What about traditional labor-intensive products?

Take light industrial goods: in May, the year-on-year figure was minus 0.2%, just climbing up from minus 1.9% in April. Then there are items like clothes, pants, and socks; footwear and headwear dropped by 4.9%, which is quite miserable; toys dropped by 7%; luggage and bags dropped by 4.9%. This sector is purely dragging down the numbers.

Therefore, from this structure, we can see very clearly: what is propping up the scene are integrated circuits, servers, and electric vehicles. This divergence itself is not a problem, but the issue is that next, you will see that this thickest pillar has highly suspicious components.

A very realistic question is: where are these abnormal exports being sold?

Let's look at the sub-item data, which is the flow of goods. There are mainly a few directions.

First, exports to the United States plummeted by 16% in the first quarter, then surged violently to a positive growth of 35.4% in May.

It sounds like US-China relations have improved, as if China and the US have reconciled, but actually, no.

There are several reasons. The first and most important one is that the base figure for the same period last year was extremely low; by May of last year, it had basically hit rock bottom. The second reason is a technical reduction in effective tariffs on certain Chinese goods by the United States. And there is another crucial factor: expectations.

US importers are gambling. They are betting that there will be even harsher tariffs after the midterm elections, so they are sparing no expense to book shipping space and stockpile goods in advance.

To translate that: this is not a recovery in demand at all; this is doomsday stockpiling.

Second, exports to ASEAN grew by another 24.3%, with ASEAN firmly holding its position as the largest trading partner.

Everyone knows the reason behind this: origin laundering.

Now, whether it is Europe, Japan, or the United States, they are all tightening rules of origin. Starting last year, a large number of Chinese enterprises went to Vietnam, Malaysia, and Thailand. What is China doing now? It is exporting machinery, components, and even semi-finished products to these factories, which then go through a detour before entering Europe and America.

Third, this part is the real protagonist: exports to Hong Kong increased by 63.1% year-on-year.

Does Hong Kong have any manufacturing entities? No.

This 63.1% is almost entirely re-export trade. Re-export trade itself is legal, but the problem lies in the fact that this scale is so abnormally inflated. When you add the CCP's blockade on foreign exchange and cross-border investment over the past few months, and put these two together, I don't need to say much more about what kind of shady business is going on here.

Isn't this export growth just the art of moving money from the left hand to the right hand?

To put it bluntly, it is a trick to make assets vanish into thin air.

How is this part operated? Let me explain it clearly to you.

Suppose you have a manufacturing factory in China, called Company A. Then you have another trading company in the Cayman Islands or another tax haven, called Company B. On the surface, these two companies are independent, but the actual controller behind both is you.

In normal business, if Company A makes money, you have to pay a 25% corporate income tax in China. If you also want to put the profits into your own pocket, you have to pay another 20% personal income tax. Moreover, under the current foreign exchange controls, there is basically no way for tens of millions or even hundreds of millions in funds to flow directly overseas.

What to do?

At this point, something called "transfer pricing" makes a grand entrance. It has only one core purpose: to forcibly transfer profits from high-tax, highly regulated regions to low-tax, zero-regulation regions, achieving the legal flight of capital.

These people mainly rely on the following three-step combo.

First, buy high. The goal is to keep costs in China and send profits abroad.

For example, Company A needs to import a batch of materials. The market price should be 100 yuan, but you have Company A purchase them from your own overseas Company B at an exorbitant price of 500 yuan. The result is that Company A's costs soar instantly; on paper, it not only makes no money but actually shows a huge loss. This way, there is no need to pay Chinese corporate income tax. And the 400 yuan price difference paid out becomes the legal profit of Company B.

Second, sell low, sell assets at a dirt-cheap price. This means keeping profits overseas.

For example, Company A produces a batch of mobile phones with a cost of 1,000 yuan, and they can be sold for 2,000 yuan on the market. But you don't let Company A sell directly to real overseas customers; instead, you sell them to your own Company B at a bargain price of 1,001 yuan first. Then Company B sells them to the end users for 2,000 yuan.

Company A works for a year, earning only 1 yuan per phone, and pays very little tax. The remaining 999 yuan in windfall profit is kept overseas by the overseas company.

Third, rely on the black box of intangible assets.

This is the hardest to investigate because there is no so-called standard market price.

For example, your overseas Company B creates a trademark or a set of management experience and authorizes Company A in China to use it. Every year, it charges Company A huge royalties, information management fees, brand management fees, and the like. Just by saying the word, profits can be siphoned overseas.

Let's look at another set of data. This is also the biggest mystery in the sub-item data: integrated circuits.

In May, the export volume of integrated circuits grew by only 2.1%, but the value surged by 110.9%. Looking at a longer timeframe, it is even more absurd. In the first five months, volume grew by 8.7%, but value surged by 90%.

Not many more boxes were shipped, yet the revenue nearly doubled.

How did that money inflate?

Let us trace a shipment's journey backward.

Globally, everyone is scrambling for high-bandwidth memory and high-performance graphics chips, pushing upstream core component prices through the roof. In this supply chain, China is often just the packaging link, acting as the final assembled-goods exporter.

This means a huge chunk of the export value written on customs declarations is bought in at high prices and then resold as-is. Price hikes are not decided by China, and the profits do not stay in Chinese hands. China is merely a ledger clerk in this global price surge.

Then there is the shipping cost factor.

In May 2026, the maritime shipping market was experiencing a century-scale surge. The Shanghai Containerized Freight Index rose continuously in May, climbing back above the 2,000-point mark. The Red Sea crisis forced vessels to reroute, burning shipping capacity entirely at sea. A massive portion of export values was declared under CIF price terms, causing shipping and insurance costs to be completely factored into the cargo value.

Consequently, the Chinese Communist Party (CCP) began scheming: since export values can grow detached from physical goods, why not skip the goods altogether and simply manufacture the numbers? Various export KPIs have long become performance indicators for local governments.

Let us cross-verify this.

When the CCP brags about a trade surplus, we check enterprise income statements.

In the first quarter of 2026, 42 listed photovoltaic companies suffered a combined loss of 13.179 billion yuan; even with another 38 profitable companies added, their combined earnings were only 6 billion yuan. The entire industry is already in deep loss.

Orders look glamorous on the books, but that is because clients are already losing money to the point of rolling their eyes, and shipments cannot even be settled. Recognized as revenue in financial terms, these orders are nothing more than pies painted in the sky.

Finally, let us look at the cracks.

In May alone, the merchandise trade surplus was $105.4 billion. Logically, with a surplus of this magnitude, foreign exchange reserves should show a trending upward trajectory.

The reality is that foreign exchange reserves at the end of May were only $31.7 billion higher than at the end of April. Moreover, the State Administration of Foreign Exchange itself stated that this increment relied on the conversion effect of the US dollar index and asset prices. The surplus's contribution on the flow side was equal to zero.

On one hand, a surplus reaching the hundred-billion level; on the other hand, foreign exchange reserves standing completely still. Where did the money go?

In April, the trade surplus in goods and services was 407.5 billion yuan, equivalent to about $53 billion. However, the bank settlement and sale of foreign exchange surplus that same month was only $40.1 billion. This means only 70% of the earned money was actually converted back into RMB and returned to the Chinese financial system. The rest either lingered in corporate overseas accounts in a wait-and-see stance or continued to slip directly out through various cracks under the capital account.

This convergence of capital outflow is not a spontaneous market balance, but rather the result of suppression by CCP controls.

Currently, review of foreign exchange purchases for US dollars and the penetrating audits of individual quotas have blocked all export loopholes. Therefore, we see a surface-level stability, but it is a stability maintained under a pressure cooker. The tighter the cooker is pressed, the greater the pressure building up inside.

Finally, we build a model to squeeze out the water.

Step one: Instead of viewing the three components of water as independent numbers, we treat them as three components of a three-dimensional random vector: price inflation, transfer pricing and fraudulent tax-rebate empty trading, and freight inflation. We assign a normal distribution to each component, take the lowest value pointed to by the evidence, and calculate a mean.

Step two: These three parts of water are not independent; they have strong correlations.

For example, the Hong Kong channel handles both transfer pricing and the repatriation of fraudulent tax funds, with the same shell companies utilizing the exact same underground network.

Step three: Utilizing the properties of the normal distribution.

Ultimately, it is calculated to follow a distribution with a mean of 12.5%. From this, it is inferred that the 90% confidence interval for the true export volume lies between $310 billion and $321.1 billion. The probability that the true scale exceeds $340 billion is only 0.9%, while the probability that the water exceeds 12% is as high as 98.4%.

The figure of $376.8 billion is about 10.8 standard deviations away from the model's expected value.

Statistically, the probability of 10.8 standard deviations is a once-in-ten-thousand-years event. The Chinese Communist Party (CCP) has created a miracle once again.

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