The State Administration of Foreign Exchange (SAFE) has recently disseminated the external debt data as at the end of September 2017 and its official answered press questions regarding the recent external debt status in China.

Q: Could you brief us on the external debt status in China for the first three quarters of 2017?

A: China's external debt grew stably in the first three quarters of 2017. As at the end of September 2017, China's full-scale outstanding external debt (denominated in the RMB or other currencies) amounted to USD 1.68 trillion, an increase of USD 117.2 billion or 7.5% from the end of June. Increased debt securities, trade credit and prepayment were the major sources of growth. In particular, the growth of debt securities accounted for 45% of the overall growth of external debt, indicating that alongside the liberalization of the inter-bank bond market, foreign institutions have become more involved in the domestic bond market. The increase in trade credit and prepayment was about 20% of the overall increase in external debt, which is closely related to the ongoing recovery of China's foreign trade.

Q: How to look at China's current external debt status?

A: China's economy has shown a strong momentum for growth while maintaining stability, providing a solid foundation for the steady growth of external debt. China's economy sustained stable growth in the first three quarters, with GDP hitting RMB 59.3 trillion, up by 6.9% year on year. Its imports and exports rose fast, with total import and export value reaching RMB 20.3 trillion in the first three quarters, up by 16.6% year on year. The two-way fluctuations of the RMB exchange rates displayed much stronger flexibility, the expectations of foreign exchange rates stayed stable, and the demand for cross-border financing from the real economy was strengthened.

Policy dividends have been yielded to provide important conditions for the stable growth of China's external debt. With the implementation of measures for trade investment and financing facilitation such as the macro-prudential management policy for full-scale cross-border financing and free trade zones, a growing number of enterprises have benefitted from policy dividends, expanding their financing channels while reducing their financing costs. The inter-bank bond market has been increasingly liberalized. In particular, the launch of Bond Connect between the mainland and Hong Kong in July has further diversified the channels for overseas investors to participate in China's financial market, increasingly motivating overseas institutions to hold more of domestic bonds.
Going forward, China will improve the macro-prudential management of cross-border financing by enhancing the control framework with two pillars of monetary policy and macro-prudential policy, and keep a close watch on the changes in external debt and better integrate serving the real economy and guarding against systematic risks, in a bid to boost the sustainable and healthy development of China's economy.