Q：What are the new changes to the external debt data for June 2016 that were just disseminated by the State Administration of Foreign Exchange (SAFE)?

A: In general, China's outstanding full-scale external debt picked up by the end of June. Since the beginning of 2015, China has disseminated full-scale quarterly external debt data by the IMF's Special Data Dissemination Standard (SDDS). According to the changes to external debt for 2015, the outstanding external debt as at the end of September and December fell by 8.9% and 7.4% quarter-on-quarter respectively, except a marginal increase by the end of June. As at the end of March 2016, China's outstanding full-scale external debt fell by a smaller margin, say, 3.6% quarter-on-quarter. As of the end of June 2016, China's outstanding full-scale external debt went up by 2% quarter-on-quarter, preliminarily reversing the slump in total external debt since the second quarter of 2015, which somehow shows that China's deleveraging of external debt is coming to an end.

Q: What are the measures to facilitate borrowing of external debt by domestic institutions?

A: Since the beginning of this year, the People's Bank of China (PBC) and the SAFE have introduced a series of reformative measures to facilitate cross-border financing by domestic players. First, efforts have been made to promote macro-prudential management of full-scale cross-border financing. As at the end of April 2016, the SAFE and the PBC jointly published the Circular on Implementing Nationwide Macro-prudential Management of Full-scale Cross-border Financing, which stipulates that the integrated macro-prudential management of full-scale cross-border financing in domestic and foreign currencies will be implemented nationwide starting from May 3, 2016, allowing financial institutions and enterprises to independently conduct cross-border financing in both domestic and foreign currencies within the ceiling of cross-border financing that is linked with their capital or net assets. Second, the policies for managing settlement of foreign exchange under external debt for Chinese and foreign-funded enterprises have been unified. At the end of April 2016, the SAFE released the Circular of the State Administration of Foreign Exchange on Further Promoting Trade and Investment Facilitation and Improving Authenticity Reviews, to allow Chinese non-financial institutions to settle foreign exchange under their external debt in accordance with the existing regulations on managing external debt of foreign-funded enterprises, and provide equal treatment to Chinese and foreign-funded enterprises in the policies for managing foreign exchange settlement under external debt. Third, the policies for managing foreign exchange settlement under the capital account have been unified and simplified. Starting from June 2016, discretionary settlement of foreign exchange under external debt has been implemented, allowing enterprises to freely choose the time to settle foreign exchange under external debt, and a common negative list approach has been adopted with regard to use of receipts under the capital account, with relevant negative lists dramatically slashed. These reformative policies have facilitated cross-border investment and financing, further diversified the financing channels of domestic players, especially Chinese enterprises, lowered financing costs, and practically boosted the efforts to address the financing difficulties and cut heavy costs of financing to support the development of the real economy.

Q: What would you say about the future situation of external debt?

A: I expect that China's external debt will be further stabilized. Based on the changes in China's full-scale external debt since the beginning of this year, it is expected that China's external debt will be further stabilized along with the implementation of the reformative measures for external debt management. The PBC and the SAFE will continue to refine the external debt and capital flows management system under the macro-prudential management framework, and will strengthen ongoing and ex-post monitoring and analysis while further promoting cross-border investment and financing facilitation, so as to guard against external debt risks and safeguard China's economic and financial security.