BEIJING, Dec 30 (Reuters) - China’s foreign exchange regulator said on Wednesday that it will improve its policy reserves and contingency plans to curb risks from abnormal cross-border capital flows.
A fall of $150.3 billion in China’s foreign debt in the third quarter showed that some firms had moved to repay some of their liabilities to hedge against currency risks, the State Administration of Foreign Exchange (SAFE) said.
China’s outstanding foreign debt stood at $1.53 trillion at end-September, down from $1.68 trillion at end-June, SAFE said in a statement on its website.
Short-term foreign debt accounted for 67 percent of the total, while medium- and long-term debt made up for 33 percent.
China’s surprise devaluation of the yuan currency on Aug. 11 fueled a wave of capital outflows on fears the world’s second-largest economy might be slowing more sharply than earlier thought.
Decisions to adjust China’s reserve requirement ratio and use of quantitative tools must consider the impact on capital flows, the central bank’s chief economist wrote in the bank’s official publication on Wednesday.
Cutting banks’ reserve requirement ratios (RRR), the amount of cash that banks must set aside as reserves, too often and by too much would result in an excessive fall in onshore domestic interest rates and subsequently spur capital outflows, Ma Jun wrote in the Financial News.
Reporting by China Monitoring Desk, Kevin Yao and Sue-Lin Wong; Editing by Kim Coghill