China Recorded Manageable Foreign Debt Ratios Last Year on Stable Operation of Macroeconomy
Xu Wei
/SOURCE : Yicai
China Recorded Manageable Foreign Debt Ratios Last Year on Stable Operation of Macroeconomy

(Yicai Global) March 30 -- China posted impressive foreign debt-to-GDP and foreign debt-to-exports ratios last year, said the country's foreign exchange market regulator, adding that latest data suggest the country's foreign debt risks are manageable.

As of the end of last year, China's outstanding foreign debt-to-gross domestic product ratio was 14 percent, lower than the internationally recognized safe limit of 20 percent, and both its outstanding foreign debt-to-exports ratio and its interest and principal payments due on foreign debt-to-exports ratio were also far from risky limits, latest data showed.

As of the end of last year, China's outstanding foreign debt-to-exports ratio was 71 percent, lower than the internationally recognized safe limit of 100 percent; short-term foreign debt-to-foreign reserves ratio was 35 percent, lower than the internationally recognized safe limit of 100 percent, data showed.

As of the end of last December, China's outstanding foreign debt, including foreign currency-denominated and the yuan-denominated debt, was CNY11.18 trillion (USD1.71 trillion), excluding foreign debt of Hong Kong, Macao and Taiwan, up CNY294.8 billion from a year ago, showed latest data from the State Administration of Foreign Exchange, SAFE, yesterday.

 "All the indicators were below the internationally recognized safe limits, indicating that China's foreign debt risks are manageable overall," said SAFE. The increase in China's outstanding foreign debt was mainly attributable to the stable operation of China's macro economy and the unleashing of policy dividends, it added.

"On one hand, China's economy remains stable and is moving in a positive direction, economic indicators have grown steadily, the yuan's flexibility in both directions has been substantially strengthened, and the yuan's exchange rates are expected to remain stable overall. All these underlying factors contributed to the increase in China's foreign debt," it revealed.

"On the other hand, China has rolled out many reform measures to help facilitate cross-border financing by domestic entities. Last year, the People's Bank of China and SAFE further improved the macro-prudential management policy for cross-border financing activities to support financial institutions and companies to independently engage in cross-border financing, enabling domestic institutions to make full use of both domestic and overseas markets and resources, continuously expand financing channels and reduce financing costs," added China's foreign exchange market regulator.

Attracting Investors to Chinese Mainland Markets

Meanwhile, China's interbank bond market has become increasingly open. In particular, the Bond Connect link with Hong Kong gives overseas investors further access to the financial market on the Chinese mainland. Overseas institutions' holdings of domestic bonds have kept increasing as they have become more willing to increase such assets, SAFE pointed out.

Going forward, the PBOC and SAFE will earnestly implement the regulatory framework emphasizing on improving monetary and macro-prudential policies, continually improve macro-prudential management policies with a focus on banks and short-term capital movement and let such policies play their counter-cyclical adjustment roles to better serve the real economy and promote the sustained and healthy development of the national economy while guarding against risks, it emphasized.

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Keywords: Foreign Debt , SAFE , Regulator , Risk , GDP , EXPORTS