The State Administration of Foreign Exchange (SAFE) has recently released the data on external debt at the end of 2020. The SAFE deputy administrator and press spokesperson Wang Chunying answered media questions on relevant issues.

Q: Could you brief us on China's external debt for the fourth quarter of 2020?

A: China witnessed stable growth in external debt for the fourth quarter of 2020. By the end of December, the full-scale outstanding external debt (including domestic and foreign currencies) hit US$2.4008 trillion, up by US$92.5 billion or 4% quarter on quarter. The increase in external debt was primarily driven by the increase in foreign holdings of domestic renminbi bonds.

The external debt structure was further improved. Seen from the currency structure, external debt denominated in domestic currency accounted for 42%, up by three percentage points from the end of September 2020. As for the term structure, mid and long-term external debt made up 45%, up by two percentage points from the end of September 2020.

Q: What would you say about China's external debt situations?

A: The stable growth in external debt is a natural result of China’s economic development. In 2020, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping at its core, China saw major strategic achievements in balancing epidemic response and economic and social development. Chinese companies took the lead in resuming work and production. With GDP growing 2.3% year on year, China became the only major economy posting positive growth in the world. That is why China attracted inflows of foreign capital including external debt.

Further efforts have been made to advance the external debt facilitation reform to better serve the real economy. The People’s Bank of China and the SAFE adopted a multi-faceted approach, such as timely adjustment of the macro-prudential policy for cross-border financing, piloting external debt facilitation, and piloting one-off external debt registration, to facilitate cross-border financing for enterprises, thus alleviating the difficulties facing enterprises, especially SMEs and private enterprises, in accessing affordable financing and effectively supporting the development of the real economy.

The external debt risks are under control on the whole. At the end of 2020, the liability ratio, or the ratio of outstanding external debt to GDP was 16.3%; the debt ratio, or the ratio of outstanding external debt to export revenue from trade was 87.9%; the debt servicing ratio, or the ratio of the payments of the principal and interest on external debt to the export revenue from trade, was 6.5%; and the ratio of short-term external debt to foreign exchange reserves was 40.9%. These indicators were all within the safe range internationally recognized (20%, 100%, 20% and 100% respectively), indicating the external debt risks facing China are under control on the whole.

Although there are many uncertainties in the external environment, China’s fundamentals sustaining its sound economic growth over the long term remain unchanged. China’s external debt is expected to stay stable in the future.