China to further reduce SOE debts

2018-02-08 02:36:41 GMT2018-02-08 10:36:41(Beijing Time) Xinhua English

BEIJING, Feb. 7 (Xinhua) -- The State Council Wednesday unveiledan array of measures to further reduce leverage of state firms inits 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 businessreorganizations and bankruptcy, said a statement released after anexecutive meeting chaired by Premier Li Keqiang.

State-owned enterprises will continue to be a priority in thedeleveraging campaign, and the work should be carried out viamarket-oriented, law-based means, according to the statement.

The meeting agreed that positive progress was made last year ascorporate leverage ratios ended their gaining streak.

The debt-to-asset ratio of industrial enterprises with annualturnover more than 20 million yuan (3.18 million U.S. dollars) wentdown to 55.5 percent at the end of 2017, from 56.1 percent a yearearlier. The ratio for state-controlled firms stood at 60.4percent.

Debt-to-equity swap programs were highlighted for SOEdeleveraging during the meeting.

The government will widen the channel for private capital intodebt-to-equity swaps of SOEs. Equity investment institutions willbe encouraged to participate in the process, with measures to allowthe establishment of private equity funds focused on debt-to-equityswaps.

Financial institutions including banks, state capital investmentcompanies and insurers will be supported to conduct debt-to-equityswaps by using existing units and setting up new departments.

There will be targeted guidelines from the government to improvethe quality of debt-to-equity swaps and push related deals to comeinto effect as soon as possible.

Measures can also be expected to improve corporate governance. Adebt control mechanism will be established, and corporate capitalcan be replenished by additional share offering and bringing instrategic investors. Mixed-ownership reform will be promoted.

Policies on debt restructuring and bankruptcy will also beimproved. Government, enterprises and banks will share losses fromthe bankruptcy of debt-ridden, loss-making "zombieenterprises."

During the meeting, Li listened to a report on handlingsuggestions about government work. During the past five years, thegovernment dealt with 58,773 suggestions and proposals fromnational lawmakers and political advisors.

Li asked government agencies to pay more attention to newsuggestions and proposals during the upcoming annual sessions ofthe national legislature and the top political advisory body inMarch.

The State Council also approved rules on the express deliverysector at the meeting, with adjustments on vehicles and packagingmaterials, and new items to improve infrastructure. Enditem