Inflow of speculative capital into China slows down

SAFE figures show the balance of combined foreign debts totaled $304.97 billion, an increase of $23.93 billion.

China's efforts to curb the inflow of speculative funds has begun to show effect as the country's total short-term external debts growth continued to slow in September, the state media reported on Saturday.

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State Administration of Foreign Exchange (SAFE) figures show the balance of combined foreign debts ending September totaled $304.97 billion, an increase of $23.93 billion over the same period last year.

Short-term external debt is an indicator of cross-border capital flow; its sharp rise usually means increased financial risks.

Short-term external debts balance stood at $168.58 billion, up $12.44 billion from last year-end, accounting for 55.28 per cent of the total outstanding external debts, lower than the 55.81 per cent at the end of June.

Trade credit, which is the main cause of rising short-term debt, increased by $100 million per month in the third quarter, much lower than the $1 billion monthly growth in the first half of this year, Xinhua news agency reported.

China's short-term external debt has rocketed in the past five years, accounting for 55.94 per cent of the combined debts in March this year.

Foreign trade enterprises with bad records in foreign exchange settlement have been put under closer watch by the SAFE, which has helped prevent inflow of speculative capital.

According to the SAFE, the ratio of short-term foreign debts to foreign exchange reserves dropped for the first time at the end of June, reaching 5.85:1 by the end of September, well above the 1:1 international safe standard.