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Currency Carry Trade by Trucks: The Curious Case of China’s Massive Imports from Itself

Review of Finance 2023 27(2), 469-493 open access
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.”