The State Administration of Foreign Exchange (SAFE) has recently released the data on external debt at the end of September 2020. The SAFE deputy administrator and press spokesperson Wang Chunying answered media questions on China’s recent external debt situations.

Q: Could you brief us on China's external debt for the third quarter of 2020?

A: China witnessed continuous growth in external debt for the third quarter of 2020. By the end of September, the full-scale outstanding external debt (including domestic and foreign currencies) hit US$2.2944 trillion, up by US$162 billion or 7.6% quarter on quarter. The growth in external debt was primarily driven by the increase in debt securities.

The external debt structure continued to be optimized. As for the type of currency and term structure, the external debt denominated in domestic currency accounted for 39% and mid and long-term external debt, 44%, both rising by one percentage point quarter on quarter.

Q: What would you say about China's external debt situations?

A: The increase in external debt is aligned with China’s efforts to constantly expand opening-up and its gradual economic recovery. First, international investors have increased their holdings of domestic bonds in a continuous and stable manner, driving external debt under debt securities to rise. In September 2020, FTSE Russell announced to include Chinese Government Bonds in the FTSE World Government Bond Index (WGBI). As for investor entities in debt securities, mainly overseas central banks who allocate long-term assets, are stable to a certain extent. Second, China’s foreign trade has been stabilized with good momentum quarter by quarter, growing at 7.5% in the third quarter year on year, turning its cumulative growth rate from negative to positive. The associated trade credit and prepayment increased by US$25.7 billion, or 8% on a quarterly basis.

External debt is expected to stay stable in the future. Despite COVID-19 pandemic and considerable uncertainties in the external environment, China’s economic fundamentals remain favorable for long-term growth, and a general equilibrium is maintained in its balance of payments, which is favorable for the stability of external debt position. Going forward, while advancing reform and opening-up in foreign exchange field, the SAFE will take solid steps to prevent risks arising from cross-border capital flows and safeguard China’s economic and financial security.