Financial institutions in China on Thursday posted a 30.3 percent year-on-year surge in outstanding foreign currency loans by the end of February as they took advantage of the country's brisk economic activities.

A central bank report said all the institutions -- including foreign banks -- extended US$5.6 billion in new forex loans in the first two months of the year, an increase of US$3.7 billion from the same 2003 period.

Their outstanding forex loans amounted to US$136.4 billion by the end of last month.

The report did not give a breakdown of how much were loaned by China's domestic financial institutions and foreign banks, but a senior official from the China Banking Regulatory Commission, the banking watchdog, revealed earlier that foreign banks had been bolstering their presence in the market.

It was cited that outstanding forex loans from foreign banks had soared to 13 percent of the total of financial institutions in China by the end of last October, against the backdrop of the banks' holding of a mere 1.4 percent of the country's aggregate banking assets.

China now allows all kinds of foreign currency services of foreign banks, and is honoring a commitment to the World Trade Organization to open its financial markets -- in all places and currencies -- to foreign competitors by 2006.

Four foreign banks have already been given a green light by the country's banking watchdog to offer Renminbi services to Chinese enterprises in 13 designated cities
including Shanghai, Shenzhen and Dalian, as well as the economically advantaged eastern provinces of Jiangsu and Zhejiang.

The number is expected to grow.

Among the "Big Four" state-owned commercial banks, the bedrock of China's financial system, the Bank of China has long been the biggest foreign exchange dealer.

According to the central bank report, financial institutions in China had US$48.4 billion in outstanding short-term forex loans that should be served in one year by end of February, soaring 51.5 percent.

Outstanding loans with a longer term rose 27.2 percent to US$48 billion.

In February alone, forex loans of all kinds increased by US$3.5 billion, 2.8 billion more than the same month of 2003.

Over the past few months China's forex regulator has been easing restrictions on domestic enterprises and individuals utilizing foreign exchange partly in a bid to unload a percentage of its massive forex reserve -- having already rocketed to US$403.3 billion by the end of last year -- and thus ward off some of the outside pressure demanding an upward Renminbi revaluation, analysts said.

Top Chinese officials have reiterated that the yuan would be kept "basically stable" at reasonable equilibrium -- now standing at about 8.28 to the US dollar.  

(Xinhua News Agency March 12, 2004)