The State Administration of Foreign Exchange (SAFE) has recently released the data on full-scale external debt in both domestic and foreign currencies for yearend 2016, and an official of the SAFE answered press questions on the recent external debt situation and the reform of external debt management.
Q: Could you brief us on China's overall scale of external debt as at the end of 2016?
A: Overall, China's outstanding full-sale external debt had been rising stably and the risks were within control as at the end of 2016. By the end of 2016, the balance was USD 1.4207 trillion, up by USD 37.7 billion or 2.7% year on year. The overall size of external debt had been going up steadily for three consecutive quarters. By preliminary calculations, as at the end of 2016, the debt ratio (outstanding external debt/GDP) was 13%, the foreign debt ratio (outstanding external debt/export income of trade in goods and services) was 65%, the solvency ratio (sum of payments of principal and interest of mid and long-term external debt and payments of interest of short-term external debt/export income of trade in goods and services) was 6% and the ratio of short-term external debt to foreign exchange reserves was 29%. Since these risk indicators associated with external debt are within the safe range internationally recognized, China's external debt risk is within control.
Q: What would you say about the changes in the size of external debt?
A: China's efforts to deleverage its external debt have come to an end, with risks gradually unleashed. By the end of 2016, China posted USD 1.4207 trillion in outstanding full-scale external debt, which was down by USD 359.3 billion from the historical high for 2014.
To be specific, from the yearend 2014 to the first quarter of 2016, Chinese enterprises were committed to deleveraging of their external debt. They accelerated servicing of relevant debt, reducing debt of USD 397 billion throughout 2015 and USD 51.5 billion in the first quarter of 2016. This was favorable for mitigating accumulated risks arising from external debt, and reducing the risks associated with operations with high levers and currency mismatches. Since the second quarter of 2016, as external debt deleveraging came to an end, and the policies that would facilitate cross-border financing by Chinese enterprises such as macro-prudential management of full-scale cross-border financing were implemented, Chinese enterprises have begun to use external debt again. In the second, third and fourth quarters of 2016, the use of external debt recovered by USD 24.8 billion, 42.7 billion, and 21.7 billion respectively.
Q: What's your view of the size and situation of China's external debt for 2017?
A: Driven by policies and measures such as China's economic restructuring, production capacity adjustment and industrial upgrading, China's economy will continue to grow at a medium and high speed. Given that a modest amount of borrowing is necessary for an enterprise' day-to-day operations, Chinese enterprises will independently decide the time to borrow external debt and the size and currency structure of the external debt based on the changes in economic conditions both at home and abroad. In all, China's external debt will rebound stably in the year.
