SOEs urged to re­duce their heavy debt

China Daily European Weekly - - Business - Chen Jia con­trib­uted to this story.

Re­form com­mit­tee calls for com­bin­ing in­ter­nal gov­er­nance, con­trol of risks as soon as pos­si­ble

lo­cal pub­lic in­sti­tu­tions, debt con­trol of State-owned en­ter­prises, reg­u­la­tion of State as­sets of Party and State agencies and pub­lic in­sti­tu­tions, re­form of en­ter­prises af­fil­i­ated with higher-learn­ing in­sti­tu­tions and the pen­sion sys­tem, and im­ple­men­ta­tion of ma­jor re­form mea­sures set at the Com­mu­nist Party of China’s 19th Na­tional Congress in Oc­to­ber.

Par­tic­i­pants agreed that strength­en­ing con­trol of the debt lev­els of State-owned en­ter­prises is an im­por­tant move to im­ple­ment the spirit of the 19th Na­tional Congress and pro­mote the delever­ag­ing and pre­ven­tion of debt risks of such en­ter­prises. In­ter­nal cor­po­rate gov­er­nance and ex­ter­nal con­trol of risks should be com­bined, and a mech­a­nism for con­trol­ling the as­set-li­a­bil­ity ra­tio of Sta­te­owned en­ter­prises should be es­tab­lished and im­proved, they said.

Su­per­vi­sion should be strength­ened to push debt lev­els of heav­ily in­debted SOEs back to rea­son­able lev­els as soon as pos­si­ble, the meet­ing de­cided.

Cen­tral SOEs’ debt lev­els have steadily dropped in re­cent years. Their to­tal as­sets reached 54.5 tril­lion yuan ($8.6 tril­lion; 7.2 tril­lion; £6.3 tril­lion) in 2017. Their av­er­age as­set-li­a­bil­ity ra­tio was 66.3 per­cent in 2017, down by 0.4 per­cent­age point from the 2016 level.

Reg­u­la­tors said they will im­pose tar­geted reg­u­la­tion on dif­fer­ent types of SOEs this year, de­pend­ing on their debt lev­els.

An­a­lysts say China will grad­u­ally put its cor­po­rate debt risks un­der con­trol.

“China is heav­ily en­gaged in han­dling fi­nan­cial delever­ag­ing re­form, which in­cludes the re­duc­ing of cor­po­rate debt, es­pe­cially for the State-owned ones with over­ca­pac­ity,” says Iris Pang, an econ­o­mist with bank­ing group ING.

“But the pol­i­cy­mak­ers would need to skill­fully man­age liq­uid­ity so that the case does not fuel a se­ries of de­faults, which would make the mar­ket ner­vous. We ex­pect the Chi­nese govern­ment will be able to man­age the ris­ing credit risks in China,” Pang adds.

Xi said at the meet­ing that China has made ma­jor head­way in its re­form of cen­tral in­sti­tu­tions. Con­tact the writ­ers at xinzhim­ing@chi­nadaily.com.cn

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