China’s Foreign Debt Exceeds $2.4 Trillion at End of 2020


Chinese foreign debt saw a significant rise in the final quarter of 2020, as the economy staged an early recovery from the COVID-19 pandemic and offshore investors expanded their holdings of renminbi bonds.

As of the end of December 2020 China’s foreign debt balance – including both domestic and foreign currency denominated debt – stood at USD$2.4008 trillion, for an increase of $92.5 billion, or 4%, compared to the end of September 2020.

China’s foreign debt ratio (the foreign debt balance as a share of GDP) was 16.3% as of the end of 2020, while the foreign debt balance as a share of trade export revenues was 87.9%, and short-term debt as a share of foreign reserves was 40.9%. Officials said that all of these metrics are well below safe benchmarks as defined internationally.

“Foreign debt growth was mainly driven by offshore investors increasing their holdings of domestic renminbi bonds,” said Wang Chunying (王春英), a spokesperson with the State Administration of Foreign Exchange (SAFE), at the release of the figures on 28 March.

As of the end of December 2020 China’s debt securities balance was $726.7 billion, accounting for 30% of the foreign debt balance.

Wang said that steady growth in foreign debt was the “objective result” of China’s economic development, as well as its recovery from the impacts of the COVID-19 pandemic ahead of other major economies.

“In 2020, China’s overall pandemic control measures and economic and social development breapedore major strategic results, and GDP grew 2.3% compared to 2019,” said Wang. “This is the main reason China attracted offshore capital flows, including for foreign debt.”

Wang further pointed out that SAFE and the Chinese central bank are making ongoing adjustments to macro-prudential policy for cross-border financing, and undertaking trials for expediting foreign debt such as the ‘one-time foreign debt registration trial.”

Chinese regulators expect these measures to make it easier for domestic enterprises to engage in cross-border financing, and alleviate the financing burdens of small and medium-sized enterprises and private concerns.

SAFE highlighted structural improvements to China’s foreign debt balance, with renminbi denominated debt accounting for 42% of the total, for an increase of three percentage points compared to the end of September 2020.

Medium and long-term debt accounted for 45% of the foreign debt balance, for an increase of two percentage points compared to the end of the third quarter.