The Chinese government is expected to strengthen its grip on
foreign loans after unveiling a new foreign debt regulation
Tuesday.
Officials said the regulation, which takes effect on March 1, will
play an important role in improving efficiency and reducing the
risks of using foreign loans.
The State Development Planning Commission (SDPC), the Ministry of
Finance and the State Administration of Foreign Exchange have been
authorized by the State Council to govern foreign loans.
The regulation is based on the experience the government has gained
in foreign loans management over the previous two decades, since
China started its opening-up policy.
"After unveiling the regulation, we are going to take stricter
measures to supervise loan flows but this is not aimed at cutting
the volume of borrowing," the official told China Daily. He
helped devise the regulation but refused to be identified.
He
said the country will still take up loans offered by foreign
governments, international financial organizations and commercial
banks.
The infrastructure projects and public undertakings in western
China are the priority investment goals for future foreign debt in
the next five to 10 years.
"Our foreign debt volume is far below levels that would cause alarm
internationally and our ability to clear debt is robust," said the
official.
"But we need to more closely watch the situation as China has
increasingly become part of the global market since it entered the
World Trade Organization (WTO)," said the official.
He
said closer relationships with the international market spurred
China to strengthen governance of foreign loans and maintain a
sound balance of payments.
"The safety of foreign loans is closely related to the healthy
performance of the country's whole economic situation," said the
official.
He
said foreign loans have contributed a lot to China's development
during the past two decades because they have been well-supervised.
Many key infrastructure projects were finished and core
technologies and equipment imported by using the loans.
"But borrowing randomly can cause disaster," said the official,
citing the 1997 Asian financial crisis as an example.
At
present, China is among the world's major debtors. In 1985, its
inflow of foreign loans stood at just US$8.3 billion but during the
1994-99 period, the inflow jumped above US$30 billion every
year.
During the last three years, the volume of foreign loans decreased
to about US$25 billion annually as the country encouraged foreign
direct investment.
(China Daily January 16, 2003)