China's foreign exchange regulator has issued new rules to tighten local importers' trade financing in order to slow the growth of the country's foreign debt, state media reported. Under the new rules, firms can retain more foreign exchange earnings above the official limits for 90 working days. The foreign exchange earnings limits have been raised to 100% from 30-50%. Growing numbers of postponed import payments and export advances have caused China's short-term debts to balloon, as Chinese importers prefer late payments while exporters found advance payments more desirable, largely as a result of expectations that the renminbi will appreciate, and interest rate differentials between local and foreign currency deposits. China's foreign debts totaled US$223.4bn at the end of September 2004, a 15.31% year-on-year increase.
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