REUTERS in Beijing

The mainland's foreign debt stood at US$223 billion at the end of the September quarter, up 1 per cent from the end of June, in a sign that a clampdown on corporate yuan speculation is working.

Just US$2.3 billion was added to foreign debt in the third quarter, compared with nearly US$19 billion in the second quarter, according to figures released by the State Administration of Foreign Exchange yesterday.

Short-term debt, which officials have voiced concern about in recent months, was nearly US$99.7 billion at the end of September, up less than US$1 billion from the end of June. Short-term debt rose nearly US$22 billion in the first half.

Worried that mainland firms had been racking up foreign debt and using the money to bet on a revaluation of the yuan, Beijing earlier this year made it tougher for companies to acquire foreign debt.

"It could be that renminbi speculation at the corporate level is receding, or they are finding ways around the regulations," said Hui Tai, an economist with Standard Chartered Bank in Beijing.

Beijing has resisted pressure to quickly revalue the yuan, which is pegged near 8.28 to the US dollar, but officials have pledged to gradually introduce more flexibility.

The mainland also set limits on short-term overseas borrowings by foreign banks to help curb speculative capital inflows.

Foreign debt held by foreign banks fell by US$4.5 billion in the third quarter to US$33.1 billion, the administration said on its website.

China's total long-term debt was US$123.6 billion at the end of September, it said. That was up about US$1.4 billion from three months earlier.

The overall foreign debt level was not a cause for concern given the mainland's vast foreign exchange reserves of US$540 billion, Mr Hui said.

"The ratio of foreign debt to foreign reserves is about 1 to 2.4, so it's still a very safe level. And most of that debt is long-term anyway so there's still only a low risk of a liquidity crunch or sudden outflow of capital," Mr Hui said.