Last updated at: (Beijing Time) Wednesday, December 17, 2003

China's foreign debts continue to rise

China's foreign debts continued to rise in the third quarter largely due to growing trade-related liabilities, the State Administration of Foreign Exchange (SAFE) said Tuesday.


China's foreign debts continued to rise in the third quarter largely due to growing trade-related liabilities, the State Administration of Foreign Exchange (SAFE) said Tuesday.

Foreign debts outstanding at the end of September totalled US$184 billion, up 9.22 per cent from the end of last year.

Short-term debts, at US$67.4 billion, accounted for 36.61 per cent of the total, compared with 35.16 per cent at the end of June.

This was the first time China published quarterly foreign debt statistics, the administration said. It will continue to publish quarterly numbers, with a three-month time lag, in the future.

New debts borrowed in the first nine months of this year rose by 51.83 per cent on an annualized basis to US$72.5 billion, while repayments totalled US$69 billion, up 18.19 per cent from a year earlier.

The rapid growth in trade-related debts, which rose by US$2.67 billion from the end of June, continued to be the major reason for the rising number of outstanding foreign debts, the administration said.

The growing number of late import payments or export advances already fuelled a rapid rise in short-term debts in the first half of this year, a trend SAFE vowed to monitor closely.

Chinese importers increasingly opted for late payments while exporters found advance payments more desirable this year, largely as a result of expectations that the renminbi will appreciate and interest rate differentials between local and foreign currency deposits.

China's outstanding foreign debts at the end of June reversed a downward trend since 1999, and the proportion of short-term liabilities rose rapidly.

The administration attributed the trend to statistical adjustments that included trade-related credit and foreign liabilities of foreign financial institutions operating in China as part of foreign debt.

Foreign banks in China are borrowing more from overseas to meet growing needs for forex loans, as businesses preferred forex liabilities to local currency loans for lower interest rates.

Foreign banks operating in China borrowed US$58.6 billion in the first nine months of this year, 81 per cent of the nation's total new foreign debts for the period.

Their repayments registered US$55.2 billion, nearly 80 per cent of the nation's total.

But SAFE has said the situation is nothing to worry about, as China has sufficient foreign exchange reserves and a strong ability to clear foreign debts.

Although the 36.61 proportion of short-term debts is above the 25 per cent safe level of short-term liabilities that is adopted by many countries, another key measure of foreign debt safety requires foreign exchange reserves to simply be no less than outstanding short-term foreign debts.

China's foreign exchange reserve stood at US$383.9 billion at the end of September and is steadily on an upward trend.

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