Officials ease rules on foreign borrowing of Chinese firms

BOFIT Viikkokatsaus / BOFIT Weekly Review 2015/39

Chinese officials last week announced they were simplifying the rules on issuing long-term bonds (maturities over one year) abroad and the taking of overseas bank loans in foreign currencies. Firms can now issue private bond abroad or take foreign loans without official approval on every deal if it is done within their debt quota.

The outflow of capital from China in recent months has picked up, due e.g. to uncertainty in the stock market and foreign currency markets. In response, the central bank has sought to offset depreciation pressures on the yuan through interventions in the currency markets and by tightening regulations. Easing restrictions on foreign borrowing could help increase capital imports, which would offset capital outflows. Over the short term, foreign borrowing of Chinese firms is unlikely to increase rapidly as any interest in borrowing is restrained by the expectations of yuan depreciation and recent declines in interest rates at home.

China’s total foreign debt in March 2015 amounted to $1.67 trillion, of which about 25 % consisted of long-term debt and 75 % debt with maturities of less than a year.

Show weekly Review 2015/38 Show weekly Review 2015/40