SOEs stress financial risk control
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.