The 3 Key Reasons Chinese Export Growth Slumped In March

But this sharp slowdown isn't a complete surprise since the strong export data in February was attributed over-reporting.

Societe Generale's Wei Yao had said last month's rise in export data was "the result of disguised capital inflows, as exporters could overstate export amount in order to move yuan into the mainland," according to some rumors.

Bank of America's Ting Lu offers a few other explanations. First, he believes that the "growth of higher-value added ordinary exports ...used as tools for over reporting exports, slumped to -4.5% yoy in Mar from 29.8% in Jan-Feb due perhaps government’s crack down on misbehavior."

Second, he believes there is a chance that the March number could also be overstated because exports to bonded areas jumped a whopping 343 percent year-over-year in March. This compared with a 201 percent increase in Jan-Feb, and compares with a 40 percent rise in previous months.

Bonded zones include free trade zones, export processing zones, bonded logistics parks and so on.

Bloomberg reported that companies could be doctoring their trade activity to take advantage of tax benefits to help exporters. And this is why exports to bonded trade zones which have easier requirements on documenting foreign trade have increased.

Lu does expect external demand to remain weak in coming months and weigh on Chinese exports.