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Rising Short-term Foreign Debt Manageable
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A Chinese central bank spokesman has said risks associated with the country's rising short-term foreign debts are manageable.


At the end of 2005, China reported a surplus of foreign debt of US$281.05 billion (not including Hong Kong, Macao and Taiwan), a rise of US$33.55 billion or 13.6 percent over a year ago.


Of the total amount, short-term foreign debt surplus reached US$156.14 billion, a rise of US$32.94 billion over the previous year, accounting for 55.6 percent of the total, show government statistics.


"The growth of trade credits, with a contribution of 77.1 percent, is the major reason for the growth of short-term foreign debts," said the spokesman.


China's trade credit surplus rose 28 percent year-on-year to US$90.8 billion at the end of 2005, accounting for 32.3 percent in foreign debt, which is 5.9 percentage points higher than a year ago.


The fast growth of trade credits is closely related with soaring foreign trade which brings greater demand for financing, explained the spokesman.


Such credits would not cause large sum of unexpected capital flow and their large share of foreign debt could help to avoid financial risks, he said.


China has plenty of foreign exchange reserves and the ratio of foreign exchange reserves to short-term foreign debts is within secure limits, said the spokesman.


The central bank has also strengthened its early warning system for the management of foreign debts to prevent financial risks and therefore, short-term foreign debts are within manageable limits, he said.


(Xinhua News Agency May 16, 2006)


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