China's foreign debt continued to increase in the first quarter of this year, but the pace of growth has slowed.

Statistics provided by the State Administration of Foreign Exchange (SAFE) yesterday said China's outstanding foreign debt totalled US$287.9 billion (excluding Hong Kong, Macao and Taiwan) by the end of March, up 2.44 per cent from the end of 2005.

That compared to an annualized growth in foreign debt of 13.6 per cent by the end of 2005.

Outstanding mid- and long-term foreign debt rose 1.57 per cent in the first quarter from the end of 2005 to US$126.9 billion, while short-term foreign debt, or that due to be repaid within a year, increased by 3.14 per cent to US$161 billion.

But the amount of short-term foreign debt has continued to rise, standing at 55.94 per cent at the end of March.

Short-term foreign debt was 55.6 per cent at the end of last year.

The increase of short-term foreign debt is largely driven by foreign trade debt as well as expectation of a stronger renminbi, said San Feng, a researcher with the State Information Centre, a government think-tank in Beijing.

Increasing activity from foreign financial institutions in China has also contributed to the trend.

Outstanding trade debt in China was US$94.6 billion by the end of March. Borrowing from enterprises, including both domestic and foreign companies, accounted for 82.7 per cent of total foreign debt in the country.

On the expectation of a further revaluation of the renminbi, a growing number of foreign-invested companies and trade firms have been actively accruing foreign debt because of the comparatively low cost, said San.

However, he said the current level of short-term foreign debt is still acceptable and still far below the risk-level.

Source: China Daily