The pilot program of foreign debt facilitation quotas for high-tech enterprises has been expanded, foreign investors have increased their holdings of domestic RMB bonds, and the proportion of the balance of domestic currency foreign debt has increased… In the past year, China’s foreign debt situation has changed again. According to data released by the State Administration of Foreign Exchange recently, as of the end of 2021, China’s full-scale (including domestic and foreign currency) foreign debt balance was US$2,746.6 billion, an increase of US$345.8 billion from the end of 2020.
In recent years, the scale of China’s foreign debt has continued to grow. What are the reasons behind it? How do you see the overall situation? How to further promote the reform of foreign debt management? Our reporter interviewed the State Administration of Foreign Exchange and related experts and enterprises.
Meeting financing needs and conforming to the law of development
——China’s economic strength has been strengthened, and China has continued to expand its opening up, attracting continuous inflow of overseas funds, and promoting the growth of foreign debt.
In Zhaoqing, Guangdong, Jintian Copper Co., Ltd.’s new product project has been accelerating recently. Li Feng, general manager of the company, introduced that they are mainly engaged in the manufacture, processing and sales of copper pipes, copper rods and enameled wires, as well as the import and export of related goods and technologies. The business has been in good condition since last year, and two new batches of projects have been launched this year. He told reporters that due to the large output and high unit price of raw materials, the company’s capital needs are relatively large. “Last year, the company borrowed 2 foreign debts, equivalent to RMB 192 million. With the construction and commissioning of new projects, we will still need to borrow foreign debts.”
Enterprise Borrowing foreign debt is one of the components of China’s foreign debt. Wen Bin, chief researcher of China Minsheng Bank, said in an interview with this reporter that from the perspective of corporate financing, appropriate borrowing of foreign debt can effectively meet financing needs and reduce corporate financial costs when factors such as domestic and overseas borrowing costs are fully compared. .
In addition to corporate debt, what are external debts? According to the statistical rules of the International Monetary Fund’s Special Data Dissemination Standard (SDDS), China’s full-scale external debt statistics are all debts obligated by residents (domestic entities) to non-residents (foreign entities) to repay. According to the debt instruments, it can be divided into loans, debt securities (bonds issued by domestic institutions overseas and domestic RMB bonds invested by foreign investors), currency deposits (such as deposits of non-residents in domestic banks), trade credits and prepayments (enterprises due to trade funds Liabilities arising from different timings of receipt and payment and transfer of ownership of goods, including deferred payments and advance receipts) and direct investment: Five types of intercompany loans.
Outside CountryAccording to data released by the State Administration of Foreign Exchange, since 2016, the scale of China’s full-scale foreign debt has continued to grow steadily. By the end of 2021, the balance of foreign debt was US$2,746.6 billion. The person in charge of the relevant department of the foreign exchange bureau analyzed to reporters that the growth of foreign debt is mainly due to the continuous strengthening of China’s economic strength, attracting continuous inflow of foreign capital; the steady and orderly promotion of the two-way opening of the financial market has created a good system for foreign investors to invest in China’s financial market environment; continue to promote the reform of foreign debt facilitation to provide financing convenience for enterprises.
“It should be noted that with the development of China’s economy, the continuous expansion of opening up and the recognition of the Chinese market by international investors, the increase in the total scale of foreign debt is in line with the laws of economic development and objective It is normal to need it.” Wen Bin said that in terms of total volume, compared with countries of the same economic scale, the overall scale of China’s foreign debt is moderate. According to the latest data on global external debt released by the World Bank (the data for the end of 2021 will be released in April this year), as of the end of September 2021, China’s full-scale external debt balance was 2,696.5 billion US dollars, ranking tenth in the world in terms of scale. The United States, the euro area, the United Kingdom, Japan’s foreign debt balance is 8.5 times, 6.8 times, 3.6 times and 1.8 times that of China, respectively.
The risks are generally controllable, and the structure is continuously optimized
—main indicators such as external debt debt ratio and debt service ratio are all within the internationally recognized safety line , far below the overall level of developed and emerging countries
The scale of external debt continues to grow, how do you view its risk situation?
Wen Bin introduced that the international indicators used to measure the potential risk of an economy’s external debt mainly include two categories: one is used to measure the repayment of an economy’s external debt Indicators of capacity, such as debt ratio (external debt balance/GDP, reflecting the relationship between the size of an economy’s external debt and its economic strength) and debt ratio (external debt balance/trade export revenue, reflecting the sustainability of external debt, usually exports The stronger the capacity, the greater the ability to repay external debt), etc.; the other is to measure whether a country has sufficient liquidity to fulfill its short-term external debt repayment obligations, such as the ratio of short-term external debt to foreign exchange reserves (reflecting other means of payment when a country repays its external debt) When it is insufficient, the ability to use foreign exchange reserve assets to repay foreign debts, especially short-term foreign debts) and so on.
According to the latest data from the State Administration of Foreign Exchange, at the end of 2021, China’s external debt debt ratio was 15.5%, debt ratio was 77.3%, debt service ratio was 5.9%, short-term external debt and foreign exchange reserves The proportion is 44.5%. The above indicators are all within the internationally recognized safety line (respectively20%, 100%, 20% and 100%), far below the overall level of developed and emerging countries.
“On the whole, China’s foreign debt risks are generally controllable.” Wen Bin said, it should be pointed out that when evaluating a country’s foreign debt situation, we should not only focus on the scale, but also at the scale. Depends on the structure, especially changes in currency, maturity and debt instruments.
In Hong Kong, the People’s Bank of China successfully issued RMB 5 billion central bank bills. The issuance was widely welcomed by foreign investors. Institutional investors such as banks, funds and international financial organizations from many countries and regions actively participated in the subscription. The total amount of bids exceeded 22 billion yuan, which is about 4.4 times of the issuance.
The popularity of RMB central bank bills is a microcosm of the strong magnetism of RMB bonds. In recent years, Chinese bonds have been included in mainstream international indices such as Bloomberg Barclays and JPMorgan Chase. Gu Wei, general manager of Greater China, JPMorgan’s Global Corporate Payments Department, believes that with the further opening of China’s financial market, more global investors will connect with China, an important market. The inclusion of Chinese bonds in relevant indexes is expected to bring inflows of $250 billion to $300 billion to the Chinese bond market.
International investors recognized the prospects of the Chinese market, steadily increased their holdings of domestic RMB bonds, and the balance of debt securities continued to grow. According to data from the State Administration of Foreign Exchange, the proportion of debt securities in the balance of full-scale foreign debt has increased from 16% at the end of 2016 to 32% at the end of 2021, and the increase in the balance of debt securities accounts for 50% of the increase in the scale of foreign debt in the past five years. By the end of 2021, the market value of domestic RMB bonds held by international investors was 5.6 times that at the end of 2016.
The relevant person in charge of the above-mentioned foreign exchange bureau stated that since the increase in the balance of debt securities was mainly due to the increase in overseas investors’ holdings of domestic RMB bonds, more than 50% of foreign investors became overseas central banks. , with the goal of long-term allocation of RMB assets rather than short-term profits, and the investment has inherent stability. “The proportion of debt securities has continued to increase, further enhancing the stability of the scale and structure of foreign debt. In addition, the increase in the proportion of foreign debt in local currency and the proportion of medium and long-term foreign debt has helped further optimize China’s foreign debt structure.”
From the perspective of currency structure, since there is no currency exchange problem when repaying foreign debt in local currency, it will not affect the foreign exchange market and foreign exchange reserves, and for enterprises, there is no exchange rate risk concern, so the risk is relatively smaller. At the end of 2021, the proportion of foreign debt in local currency in the balance of full-scale foreign debt will increase from 34% at the end of 2016 to 45%, an increase of 11 percentage points.The ability to protect against exchange rate risk has been enhanced.
In terms of term structure, the proportion of medium and long-term external debt in the balance of full-scale external debt has increased from 39% at the end of 2016 to 47% at the end of 2021, an increase of 8%. percent. The increase in the proportion of medium and long-term foreign debt will help reduce the risk of maturity mismatch of China’s foreign debt and reduce the liquidity risk of debt repayment.
Expanding the scope of the pilot program to support the real economy
——At present, the foreign exchange bureau has carried out foreign debt financing in 9 regions The pilot program of facilitation quotas was carried out in 11 regions to carry out one-off foreign debt registration.
The external debt has grown steadily, and related management reforms are also being continuously advanced. From facilitating foreign institutional investors to invest in the inter-bank bond market, to deepening the pilot reform of foreign debt registration management, to launching the pilot of foreign debt facilitation quotas to support cross-border financing of high-tech enterprises… In recent years, the foreign exchange bureau has issued a series of policy measures to enhance the The level of overseas financing facilitation.
Founded in 2017, Aipi (Beijing) Intelligent Technology Co., Ltd. is an offline space digital and intelligent enterprise. Li Yang, the company’s chief financial officer, introduced to reporters that in 2018, the foreign exchange bureau launched a pilot program of foreign debt facilitation in the Zhongguancun National Independent Innovation Demonstration Zone in Beijing, allowing small, medium and micro high-tech enterprises that meet certain conditions to independently borrow foreign debt within a certain amount. “This is a major benefit for companies like us, which are in the early stage and are good at technology. This policy facilitates the overall use of enterprises and the flexible allocation of overseas funds. Overall, the efficiency of capital utilization has been improved by about 20%, and the cost of capital for enterprises has been reduced by about 20%. 3% to 5%.” Li Yang said that the company’s business has accelerated in the past two years, and projects have been launched in many places across the country. During this process, the previously approved foreign debt quota has been used up, and the new quota will be used from February this year.
Last year, the SAFE further expanded the pilot program of foreign debt facilitation quotas for high-tech enterprises. According to the data of the foreign exchange bureau, the pilot program of the foreign debt facilitation quota has been carried out in 9 regions including the Beijing Zhongguancun National Independent Innovation Demonstration Zone and the Shanghai Free Trade Zone.
Focusing on the issue of foreign debt registration, which is a common concern of enterprises, the foreign exchange bureau has continued to deepen the pilot reform of foreign debt registration management in recent years, and has identified eligible non-financial enterprises (real estate enterprises and local government financing) Except for the platform), you can apply to the local foreign exchange bureau for one-time foreign debt registration according to the amount of 2 times the net assets of the enterprise, and you do not need to go through the foreign debt registration one by one according to the loan contract.
Lifeng said that the one-time foreign debt registration can greatly reduce the “sole cost” of going to and from the foreign exchange bureau for business processing, which can save about 12-15 days. “Especially considering that when borrowing foreign debts, it is necessary to The exchange rate is locked during the window period, and the window period may be missed during the previous filing period. In total, the one-time foreign debt registration can effectively reduce the financing cost of the company by about 2.5 million yuan. “
According to the data, the SAFE has established a number of foreign exchange offices in Beijing Zhongguancun National Independent Innovation Demonstration Zone, Guangdong-Hong Kong-Macao Greater Bay Area, Hainan Free Trade Port, and Lingang New Area of Shanghai Free Trade Zone. 11 regions including 11 regions to carry out one-off foreign debt registration.
The foreign exchange bureau stated that it will further promote the reform of foreign debt registration management, expand the scope of foreign debt facilitation pilot projects in a timely manner, and take multiple measures to Enterprises provide cross-border financing convenience, reduce financing costs, help alleviate the problem of difficult and expensive financing for real enterprises, especially small and medium-sized enterprises and private enterprises, and effectively support the development of the real economy.
(Original title: The balance of foreign debt at the end of 2021 was US$2,746.6 billion, and foreign investors continued to increase their holdings of domestic RMB bonds—the scale of China’s foreign debt was moderate)