Center

Nation cuts overseas borrowing

By Xin Zhiming (China Daily)
Updated: 2007-03-03 08:43

By the end of 2006, SAFE said, China's foreign debt had increased by 14 percent on the previous year. Short-term debt increased by 16 percent.

About 57 percent of China's foreign debt was short-term by the end of 2006, according to SAFE.

That compared with 55.8 percent by the end of June and 55.28 percent by the end of September.

The country's short-term foreign debt hit $168.6 billion at the end of last September, according to SAFE.

Zhao Xijun, a senior economist from Renmin University of China, said the move was not unexpected. "China's short-term foreign debt has increased rapidly in recent years, which brings structural risks," he said. "It is time to take some measures."

Zhao said the new rule would also curb so-called hot money, or speculative capital, which has been bringing risk to the domestic financial market.

"By reining in hot money, the new rule may also alleviate pressure on yuan revaluation."

SAFE said it would cooperate with other agencies to encourage financial institutions to borrow from domestic markets and use financial derivatives to broaden their channels for foreign exchange.

(China Daily 03/03/2007 page1)