Q: How do you view the changes in China’s full-scale external debt data as of the end of September?

A: As at the end of September 2015, China's full-scale outstanding external debt was the equivalent of USD 1.5298 trillion, down by USD 150.3 billion from the end of June. Our analysis shows that the changes in the size of China's external debt are primarily caused by the following: first, domestic players have been actively repaying debt under trade finance to avoid exchange rate risks. As of the end of September, banks' balance of trade finance (i.e., refinancing and forward L/C) was USD 31.4 billion lower than that of the end of June. Second, domestic players have optimized the structure of liabilities and assets in domestic and foreign currencies through financial operation. By the end of September, the outstanding RMB-denominated external debt fell by USD 98.1 billion from the end of June. Third, along with heightened expectations of the Fed's rate rise in the third quarter, some foreign financial institutions and non-residents have adjusted their deposit allocation. The deposits passively absorbed by Chinese financial institutions from their foreign counterparts and non-residents dropped by USD 70.3 billion as of the end of September, as compared with that of the end of June.

Overall, with the decline in external debt, the external solvency risk facing China has been reduced. Going forward, as the RMB exchange rate elasticity is enhanced, the capital account convertibility is further boosted and the interest rate and exchange rate change in international markets, short-term fluctuations in China's full-scale external debt may become a new normal. The State Administration of Foreign Exchange (SAFE) will continue to enhance ongoing and ex-post monitoring and analysis, actively build an external debt and capital flow management system under the macro-prudential management framework, increase the response policy reserves and improve emergency plans to guard against the risks associated with abnormal cross-border capital flows.