SOEs stress fi­nan­cial risk con­trol

China Daily (Hong Kong) - - BUSINESS -

has put delever­ag­ing of SOEs high on its agenda, ac­cord­ing to a na­tional fi­nan­cial work con­fer­ence ear­lier this month.

“The com­mis­sion has at­tached great im­por­tance to risk con­trol in cen­tral SOEs, and risk pre­ven­tion pro­vides a solid foun­da­tion for sta­bi­liz­ing growth,” said Shen Ying, SASAC chief ac­coun­tant.

To re­duce the lever­age ra­tio, SASAC has en­cour­aged en­ter­prises to op­ti­mize cap­i­tal struc­ture via pub­lic of­fer­ings on the stock mar­ket, and sup­ported ef­forts in as­set se­cu­ri­ti­za­tion, she added.

As an im­por­tant means to re­duce SOE lever­age, debt-toe­quity swaps have been ac­cel­er­ated, al­low­ing com­pa­nies with long-term po­ten­tial to ex­change their debt for stocks, SASAC said.

So far, 12 cen­trally ad­min­is­tered SOEs, in­clud­ing China Baowu Steel Group and China First Heavy In­dus­tries, have signed such swap agree­ments, which will help them deal with bad as­sets and re­duce their debt bur­den.

Lo­cal SOEs are also mak­ing full use of this ap­proach. Two coal com­pa­nies in North China’s Shanxi prov­ince in March signed debt-to-equity swap agree­ments with the lo­cal State­as­set reg­u­la­tor and China Con­struc­tion Bank, worth a to­tal of 20 bil­lion yuan ($3 bil­lion).

The deal will not only re­duce their lever­age ra­tio, but also fa­cil­i­tate their in­dus­trial trans- for­ma­tion and up­grad­ing.

Some com­pa­nies have al­ready re­ceived the fund­ing from such swaps, in­clud­ing Huaibei Min­ing Group and He­nan En­ergy and Chem­i­cal In­dus­try Group.

China should also in­ten­sify ef­forts to clear out zom­bie en­ter- prises, or weak busi­nesses that are not vi­able, usu­ally in in­dus­tries with se­vere over­ca­pac­ity and kept alive only with aid from the govern­ment and banks, ac­cord­ing to the fi­nan­cial work con­fer­ence.


A worker op­er­ates a ma­chine at a tex­tile com­pany in Baoji, Shan­nxi prov­ince.

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