The central government has no legal obligation to honour unregistered debts made by foreign banks to collapsed Guangdong International Trust and Investment Corp (Gitic), or any other mainland entity, according to Premier Zhu Rongji. Beijing sources said this was the first time Mr Zhu had taken a position on unregistered foreign debts, a key concern among Gitic's foreign creditors and other foreign banks. Mr Zhu's remarks are expected to further heighten anxiety among foreign bankers. The sources said he made the remarks at a meeting in the coastal city of Beihai during a tour of Guangxi and Guangdong last weekend to lend support to a crackdown on smuggling and foreign-exchange crimes. In Guangdong, he met provincial leaders, including his two proteges, executive vice-governor Wang Qishan and People's Bank of China Guangdong branch head Xiao Gang, who reportedly briefed him about efforts to clean up the province's scandal-ridden financial sector. Analysts said Mr Zhu's remarks were intended to serve as a warning to municipal governments and mainland companies to refrain from reckless and illegal foreign borrowing in the belief Beijing would pick up the bill if things went wrong. They were also meant to remind foreign banks to abide by the rules when lending to mainland financial institutions and companies. Analysts interpreted Mr Zhu's remarks to mean the government would not make good Gitic's debts if they were not registered with the State Administration of Foreign Exchange (SAFE). 'If you read his remarks from the mainland's perspective, it means unregistered debts will not be paid,' a mainland source said. The People's Bank of China has indicated registered debts would receive priority when a repayment scheme is worked out. Estimates put Gitic's foreign debts at more than US$2.4 billion. SAFE imposes strict controls on foreign borrowings, requiring foreign-currency loans to be approved and registered. A number of financial institutions, including about 10 international trust and investment corporations (Itics), are allowed to borrow abroad directly, but they must register foreign debts, the size of which must fall within a national quota. This is to ensure strict adherence of the non-convertibility of the capital account, which deals with inflows and outflows of foreign capital, securities investment and foreign debts. 'Every banker who lends to China must know debts must be registered with SAFE, and if he does not know, whose fault is it?' the head of a Western brokerage said. 'If Gitic did not register the debt, then you have to go after Gitic and not the central government,' he said. Last month, SAFE further tightened borrowing by saying no government body could provide guarantees for foreign loans without its approval to prevent a proliferation of such debts, seen as a key cause of the financial crisis savaging most of Asia.