The State Administration of Foreign Exchange (SAFE) has recently released data on China’s external debt at the end of 2021. The SAFE Deputy Administrator and Press Spokesperson Wang Chunying answered media questions on the relevant issues.
Q: Could you brief us on China’s external debt at the end of 2021?
A: China’s external debt continued to grow steadily in the fourth quarter of 2021. By the end of 2021, China’s external debt (including domestic and foreign currencies) stood at US$2.7466 trillion, which was US$50.1 billion higher than it was at the end of September 2021, with an increase of 1.8%. The rise in external debt mainly resulted from foreign investors increasing their holdings of RMB-denominated bonds.
The structure of China’s external debt was further improved. In terms of foreign currency structure, at the end of 2021, the proportion of external debts in domestic currency accounted for 45% of China’s full-scale external debt, an increase of 1% from the end of September 2021. The increase in the proportion of external debts in the domestic currency is conducive to reducing the currency mismatch risk of China’s external debt. From the perspective of the maturity structure of external debt, the proportion of medium and long-term debt was 47% at the end of 2021, flat with the level recorded at the end of September.
Q: What would you say about current China’s external debt situations?
A: China’s continued economic growth and opening-up efforts contributed to the rise of external debts. In 2021, China’s GDP grew by 8.1% year on year, ranking top among major economies in the world. China’s total economic volume exceeded 110 trillion yuan, maintaining its position as the world’s second-largest economy. The amount of foreign investment attracted reached a new high, with the actual use of foreign investment reaching 1.1494 trillion yuan, up by 14.9% year on year. The volume and quality of trade in goods increased, with total imports and exports of goods reaching 39.1 trillion yuan, a year-on-year increase of 21.4%.
The reform of external debt management gave strong support to the development of the real economy. In 2021, the SAFE has further expanded the trial of external debt facilitation quota for high-tech enterprises and the pilot program of external debt registration management reform. The SAFE has also taken multiple measures to facilitate cross-border financing for enterprises and reduce financing costs, so as to help easing the financing difficulties of enterprises, especially micro, small and medium-sized enterprises and private enterprises, which has effectively provided support for the development of the real economy.
China’s external debt risks were under control on the whole. By the end of 2021, the liability ratio (or the ratio of outstanding external debt to GDP) was 15.5%. The debt ratio (or the ratio of outstanding external debt to export revenue from trade) was 77.3%. 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 5.9%. And the ratio of short-term external debt to foreign exchange reserves was 44.5%. These indicators were within internationally recognized thresholds (20%, 100%, 20% and 100% respectively), indicating the external debt risks facing China were under control on the whole.
At present, with COVID-19 continuing to spread across the world, the external environment has become more complex, severe and uncertain. China has adhered to the principle of prioritizing stability, and making progress while maintaining stability, and as a result China’s national economy has continued to recover steadily and the two-way opening-up of the financial market has made steady progress. It is expected that China’s external debt will continue to maintain a steady momentum.
