Foreign debt of China rises by 5.1%
According to the State of Administration of Foreign Exchange (SAFE), compared with the end of December, China’s foreign debt rose 5.1 percent to $392.6 billion by the end of December, a majority of which is attributable to the growth in short-term debt.
Analysts warned that the rapid growth in short-term borrowing pointed to the risk of inflow of speculate capital which brings yuan appreciation.
The SAFE reported on Friday, the amount of short-term debt reached $236.7 billion, covering 60.3 percent of the total foreign debt. By the end of March, the short-term borrowing rose by $16.6 billion, which is 88% of the 18.97 billion increase in the whole foreign debt. During the first quarter, the figure of medium and long-term debt reached $155.9 billion, which rose by $2.3 billion, covering 39.7 percent. At the end of December, the percentage of short-term debt to the overall borrowing rose from 58.9%, which is 57.2% at the end of September.
“The increase in the proportion of the short-term borrowing may have something to do with the speculative hot money inflows,” said Guo Tianyong, economist with the Central University of Finance and Economics, “although the short-term borrowing, since it is included in the official statistics, look like normal debt, the capital can be used for some speculative purposes.”
Guo also said, the main reason for the continual increase in short-term borrowing is that China’s foreign currency lending has been on the rise in recent months which is showed by official statistics. some foreign banks have borrowed from overseas to lend to domestic businesses, and some of the lending may be used for speculative purposes.
Economists warned that speculative capital is flowing into China in an increasing speed as the yuan has kept appreciating. The total of the capital in China could be $1.75 trillion, which is calculated almost the same as China’s foreign exchange reserves.
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