The State Administration of Foreign Exchange (SAFE) has recently disseminated China's external debt data as at the end of March 2018, and an official from 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 2018?
A: China's external debt continued rising in the first quarter of 2018. As at the end of March 2018, China's full-scale outstanding external debt registered USD 1.8435 trillion (in both domestic and foreign currencies), up by USD 132.9 billion or 7.8% quarter on quarter, primarily driven by the increases in currencies and deposits as well as debt securities. To be specific, the increases in currencies and deposits contributed 36% of the growth in total external debt, owing to the increased deposits of foreign non-resident institutions and individuals in domestic banks; the rise in debt securities accounted for 34% of the growth in total external debt, attributable to the strong interest of foreign non-resident institutions in investing in China's bond market.
Q: What would you say about China's foreign debt situations?
A: Overall, the rise in China's foreign external debt mirrored China's economic growth and wider opening up. First, China's economy got off to a good start in the first quarter. Its GDP grew by 6.8% year on year and foreign trade, 9.4% year on year, indicating the quality and benefits of China's economic growth have been improving, thus laying a foundation for the continued increase in its external debt. Second, as the domestic bond market has been further liberalized, coupled with the good performance of China's bond market in the year to date, foreign institutional investors have become enthusiastic for buying more RMB bonds in the Chinese market, and nearly 80% of them invested in medium and long-term bonds. As a result, the share of debt securities in full-scale external debt rose from 8% at the end of 2014 to 21% at the end of March, which has become the new growth driver of China's external debt, and also shows foreign investors' solid confidence in China's economy.
Next, the SAFE will keep a keen eye on the changes in domestic and international conditions, improve the external debt and capital flow management system under the macro-prudential management framework. While boosting the facilitation of cross-border investments and financing, the SAFE will strengthen ongoing and ex-post monitoring and analysis to guard against the risks arising from unusual cross-border capital flows and safeguard China's economic and financial security.
