Foreign bank borrowings to be capped
(Shenzhen Daily/Agencies)
Updated: 2005-05-11 14:40

China would cap short-term overseas borrowings by foreign banks at US$34.8 billion this year, the government said Tuesday, as it tried to curb capital inflows fanned by speculation about a revaluation of the yuan.

The State Administration of Foreign Exchange (SAFE) has since last year imposed limits on raising short-term foreign debt by foreign banks in the country.

"The SAFE has set a combined quota on short-term borrowings by foreign banks at US$34.8 billion in 2005," the foreign exchange regulator said in a statement.

The quota was "based on China's economic situation, foreign banks' forex credit growth, the usage of short-term borrowing quotas and the rise of China's foreign debt," the SAFE said.

The overall borrowing quota would be allocated to each foreign bank, it said without giving details.

The government did not publish such a quota for last year.

China's short-term foreign debt surged an annual 35.5 percent last year to US$104.3 billion, earlier government data showed, signaling overseas funds were piling into the country amid speculation of a possible revaluation of the yuan.

The Chinese government has tightened scrutiny of foreign currency inflows sparked by speculation of a yuan revaluation while trying to spur capital outflows, allowing firms keep more hard currency income and invest more overseas, to help take the heat off the yuan.

The Chinese government has pledged to make the yuan more flexible over time, but has stressed necessary conditions such as a healthier financial system and a stable economy and also warned that it would not embark on any currency reforms while speculation was rife.