The State Administration of Foreign Exchange (SAFE) has recently released the data on external debt at the end of March 2020. Wang Chunying, press spokesperson and chief economist of the SAFE, answered media questions on recent situations of China's external debt.
Q: Could you brief us on China's external debt for the first quarter of 2020?
A: China witnessed steady growth in external debt in the first quarter of 2020. It posted US$ 2.0946 trillion in full-scale outstanding external debt (including domestic and foreign currencies) at the end of March 2020, up by US$ 37.3 billion or 1.8% quarter on quarter. The increase, primarily driven by the upswings in the balances of bank currencies and deposits, is represented in the balances of deposits of non-resident institutions and interbank placements.
The external debt structure continued to be optimized. As for the type of currency and term structure, external debt denominated in domestic currency accounted for 38% and mid and long-term external debt made up 42%, up by three percentage points and one percentage point quarter on quarter, respectively.
Q: What would you look at current situations of China's external debt?
A: China's external debt has grown steadily in recent years, which is in sync with China's economic growth, reform and opening up. As the two-way opening up of the capital market is advanced, the Chinese market has been further recognized among international investors. On February 28, 2020, China's treasury bond was officially included in JP Morgan Government Bond Index-Emerging Markets.
China's external debt is expected to remain stable in the future. Since the COVID-19 outbreak, the People's Bank of China and the SAFE have introduced a series of facilitation policies for cross-border financing to expand the borrowing space for external debt and facilitate financing by enterprises through utilization of domestic and foreign resources and markets, so as to expand access to financing and reduce financing costs. First, the macro-prudential regulation parameter for cross-border financing has risen up from 1 to 1.25, expanding the borrowing space for enterprises from two times to 2.5 times of net assets. Second, a pilot program has been expanded for external debt facilitation, allowing high-tech enterprises in the pilot regions to autonomously borrow external debt within a certain quota and expanding the pilot scope for one-off external debt registration. Third, easy access has been established, allowing enterprises to apply for external debt registration online. Data shows that these facilitation measures have not caused significant increase in external debts and external debt risk has been kept under control. As these policies take effect, it is expected that external debts will remain stable in the future.
Currently China's economy still features high potential, strong resilience, great leeway and abundant policy instruments and the foundation for the overall equilibrium of the balance of payments remains strong, which is favorable for external debt to stay stable. Next, the SAFE will continue to deepen reform in foreign exchange administration, advance the opening up of the financial market, and further reduce the financing costs of the real economy while effectively mitigating cross-border financing risks, in an attempt to boost the healthy growth of the real economy.