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In its report issued Sept. 27 on China's international balance of payments for the first half of 2005, the State Administration of Foreign Exchange has concluded that China's international balance of payments presented a sound and stable scenario and a strong risk resistance capability during the period.

The report cited that China's current account enjoyed a 67.3 billion USD of surplus for the first half of 2005. A sizable current account deficit, the report said, is regarded internationally as the major risk triggering crisis of the balance of payment.

The report shows that China's forex reserves are sufficient enough to support 14.3 months of imports and the forex reserves ratio to the short-term debts stands at 503.2 percent, far above the 100 percent warning line widely recognized by the international community. In addition, debt repayment rate is well below the 15 percent of the internationally recognized warning line. All of that implies little risks of a crisis of international balance of payments in the foreseeable future.

However, the fast growing of short-term foreign debts deserves special attention, although the report believes the risk of short-term debts is basically controllable. The percentage of short-term debts in the country's total foreign debts balance rose to 53.1 percent by the end of June, 2005, from 49.8 percent in 2004 and 38 percent in 2002. The report holds that this resulted from the expanding foreign trade, more active domestic business by foreign-funded banks and the fast growh in foreign investment in China.

The report also spots the main problems in the international balance of payments for the first six months. Fast commodity export and slow commodity import led to soaring trade surplus and trade disputes, indicating the necessity of improvement in quality and benefits of foreign trade. Restrictions on exports consuming too much energy at the cost of environment, in particular, should continue.

The report also warns against the impact of the sharp rise in forex reserve on the monetary policy, inflation and asset bubble.

SAFE predicts in this report a steady global and domestic economic operation for the second part of the year, a sizable balance of payment surplus for China for the whole year, and a fast growth of the country's forex reserve. It also believes that the upward momentum of the current account will continue and the growth of the surplus in capital account and financial account may slow down.

The SAFE will issue the report every half year.