The State Administration of Foreign Exchange (SAFE) recently released the external debt data at the end of March 2021. Wang Chunying, SAFE Deputy Administrator and Press Spokesperson, answered media questions on relevant issues.

Q: What is the situation of China’s external debt in the first quarter of 2021?

A: The scale of China’s external debt has increased steadily in the first quarter of 2021. As of the end of March 2021, China recorded US$2.5266 trillion in outstanding external debt denominated in both domestic and foreign currencies, an increase of US$125.8 billion or 5% compared with the end of 2020. The growth of external debt was mainly driven by the increase of foreign investors’ holdings of domestic renminbi bonds.

The structure of external debt was further optimized. With respect to currency structures, the outstanding external debt in domestic currency accounted for 43%, up by 1 percent compared to the end of 2020. In terms of maturity structure, the outstanding medium-and long-term external debt accounted for 45%, the same as the end of 2020.

Q: How do you see the current situation of China’s external debt?

A: The improvement of China’s economy was the basis for the steady growth in the scale of its external debt. In the first quarter of 2021, China’s economy got off to a good start, with its GDP growing by 18.3% year on year and the steady operation of the balance of payments and foreign exchange market. These factors were the basis for the steady increase in the scale of external debt. In the first quarter of 2021, foreign investors continued to increase their holdings of renminbi bonds, reflecting the achievements of the opening of the domestic bond market and investors’ confidence in the prospects of China’s economic development. These foreign investors were mainly institutions, such as foreign central banks and sovereign wealth funds, which tend to allocate renminbi assets in the medium and long term and boast good investment stability.

It is expected that the scale of external debt will maintain stability. At present, the global epidemic situation is still severe and the world economic recoveries are diverging. However, China’s economy has maintained a steady recovery, and the fundamentals of its long-term economic improvement have not changed. It is expected that the scale of external debt will remain stable in the future. SAFE will continue to serve the real economy and improve the liberalization and facilitation of cross-border trade，investment and financing. At the same time, SAFE will continue to improve the “macro-prudential and micro-regulatory” management framework for the foreign exchange market, actively encourage market players to adopt a “neutral concept of exchange rate risk”, and effectively prevent cross-border financing risks.