BEIJING — The State Council on Feb 7 unveiled an array of measures to further reduce leverage of state firms in its latest effort to rein in financial risks.
China will provide stronger support for debt-to-equity swaps, promote mixed-ownership reform, and improve policies on business reorganizations and bankruptcy, said a statement released after an executive meeting chaired by Premier Li Keqiang.
State-owned enterprises will continue to be a priority in the deleveraging campaign, and the work should be carried out via market-oriented, law-based means, according to the statement.
The meeting agreed that positive progress was made last year as corporate leverage ratios ended their gaining streak.
The debt-to-asset ratio of industrial enterprises with annual turnover more than 20 million yuan ($3.18 million) went down to 55.5 percent at the end of 2017, from 56.1 percent a year earlier. The ratio for state-controlled firms stood at 60.4 percent.
Debt-to-equity swap programs were highlighted for SOE deleveraging during the meeting.
The government will widen the channel for private capital into debt-to-equity swaps of SOEs. Equity investment institutions will be encouraged to participate in the process, with measures to allow the establishment of private equity funds focused on debt-to-equity swaps.
Financial institutions including banks, state capital investment companies and insurers will be supported to conduct debt-to-equity swaps by using existing units and setting up new departments.
There will be targeted guidelines from the government to improve the quality of debt-to-equity swaps and push related deals to come into effect as soon as possible.
Measures can also be expected to improve corporate governance. A debt control mechanism will be established, and corporate capital can be replenished by additional share offering and bringing in strategic investors. Mixed-ownership reform will be promoted.
