China’s foreign debt balance hits 700 billion US dollars

Edited and Translated by People's Daily Online

By the end of September 2011, China’s foreign debt balance stood at 697.2 billion U.S. dollars. China’s foreign debt increased by 54.6 billion U.S. dollars in the third quarter of 2011 compared with the data released at the end of June, according to a report by State Administration of Foreign Exchange (SAFE) recently.

According to international standard, the warning limit of debt ratio is 20 percent for common countries and 25 percent for developing countries. A country’s debt ratio is the ratio of its foreign debt to the gross domestic product. Given China’s gross domestic product of about 45 trillion yuan and foreign exchange reserve of 3.3 trillion U.S. dollars, China’s foreign debt is far below the warning limit.

The SAFE said, the medium-term and long-term foreign debt balance is 189.5 billion U.S. dollars, accounting for 27.19 percent of the total amount; the short-term foreign debt balance is 507.6 billion U.S. dollars, accounting for 72.81 percent of the total amount.

As for the structure of the short-term foreign debt, the credit balance related to trade at the end of September 2011 is about 375 billion U.S. dollars, accounting for 73.87 percent of the short-term foreign debt balance, of which the trade credit accounts for 50.55 percent and bank trade finance accounts for 23.32 percent.

An official of SAFE said most credits related to trade have the background of real import and export trade transactions, of which the increase is basically consistent with that of China’s import and export trade, so the increased proportion of short-term foreign debt will not exert an adverse effect on the security of China’s foreign debt.

“The proportion of China’s short-term foreign debt of the total has increased from 52 percent of 2007 to 72 percent of September in 2011, which far exceeds the international warning line. Special attention has to be paid to the short-term foreign debt during the future promotion of capital account convertibility,” said Li Chao, deputy director of the SAFE.