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outstanding foreign debt of the state amounted to US$6.9
billion as at end September 1986. China enjoys a fairly high credit rating internationally, mainly because of its good track record of repayment and its relatively healthy
debt-service ratio (annual interest charges as a
proportion of export earnings in the same year).
end of September 1986, China's foreign exchange reserves
stood at US$10.4 billion, sufficient to cover about three
months of its import requirements.
38.
At the
Since 1979, the PBOC has authorized BOC, CITIC,
Fujian and Shanghai to issue bonds directly for overseas subscription. Over the period 1982 to 1986, China issued
more than 20 bonds of various forms, mainly in Tokyo,
Frankfurt, Hong Kong and, most recently, Singapore. Nearly US$2 billion was raised by these issues and about two-thirds of the bonds issued were denominated in Yen.
This was probably due to China's need to finance its large visible trade deficit with Japan. The interest rate on
loans in Yen was among the lowest available during that period. However, these loans have become increasingly
costly as the Yen has appreciated sharply against the Renminbi and also against most other currencies that could
have been borrowed.
39.
As China's visible trade deficit, although
narrowing, is still very substantial, and as China needs. foreign capital to implement its modernisations programme,
it is likely that China will continue to engage in
fund-raising activities overseas. No doubt it will have
more regard in future for the exchange rate risks attached to foreign currency loans.
G.F. 320
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