China Increases Foreign Debt Quota

The world’s 2nd largest economy has raised the yearly long-term foreign debt quota for overseas banks up to $24 billion.
Chinese planning agency, the National Development and Reform Commission (NDRC) which made the announcement also stated it would start a pilot project to increase the debt quota.

Those taking part in the project include Bank of East Asia, Sumitomo Mitsui Banking Corp, Citigroup, JP Morgan, Deutsche Bank AG and HSBC Holdings Plc. Due to capital account restrictions in China, foreign banks have been facing problems in supplying their Chinese operations with sufficient capital for investment and to satisfy demands for loans.

The step might also assist China to increase foreign direct investment which was lower in February as compared to last year.

The NDRC has also allowed foreign banks to borrow Chinese Yuan from international markets with the condition that they will have to inform the lenders, maturity and the size of such Yuan loans. Although the NDRC didn’t provide a comparison or breakdown, it is expected that the new quotas would be over 2 times from previous quotas.

At the end of 2011, outstanding foreign debt retained by overseas banks in China was $54 billion, including both short-term and long-term debt which is 12.13% of China’s total foreign debt.

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Leo Pierson

About Leo Pierson

Former partner in a real estate management firm, Leo, has been active in the market for the last 8 years. Ex-blogger on penny stocks, now focused on long term growth stocks, Leo provides valuable market snapshots each day as part of our editorial team.

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