The State Administration of Foreign Exchange has ordered Chinese banks to cut their short-term external debt by 70 percent.

Other Chinese financial institutions and foreign-funded banks should cut their debt by 40 percent, said SAFE.

Rather than borrowing from foreign countries, SAFE is trying to encourage financial institutions to raise money through domestic financing.

SAFE statistics show that China's short-term external debt stood at 181.1 billion U.S. dollars at the end of 2006, up 16 percent on the previous year.

Analysts say the rapid growth of short-term external debt reflects fast, high-volume cross-border capital flows which are viewed as risky.

External debt is the part of a country's debt owed to creditors outside the country. This includes debt owed to private commercial banks, government or international financial institutions.