ASSESSMENTS

Beijing's Debt Swap Program Takes Shape

Oct 21, 2016 | 09:00 GMT

Beijing's Debt Swap Program Takes Shape
It is unclear what criteria are being used to select candidates for debt-to-equity swaps from among China's many foundering state-owned enterprises.

(JOHANNES EISELE/AFP/Getty Images)

Summary

China is ramping up its campaign to rehabilitate ailing state-owned enterprises. On Oct. 10, China's Cabinet published new guidelines for the debt-to-equity swap program Beijing unveiled earlier this year. A week later, Chinese news outlet Caixin reported that Yunnan Tin had become the first provincial state-owned enterprise to put the framework into practice by striking a debt swap agreement with China Construction Bank, one of China's "Big Four" state-controlled banks. Several other enterprises will likely soon follow Yunnan Tin's lead; China Construction Bank has reportedly begun talks with at least 50 companies. Though Yunnan Tin's precedent sheds light on many aspects of the debt-to-equity swap protocol, it does not clear up the fundamental questions of how and why companies are selected for the program. 

China is ramping up its campaign to rehabilitate ailing state-owned enterprises. On Oct. 10, China's Cabinet published new guidelines for the debt-to-equity swap program Beijing unveiled earlier this year. A week later, Chinese news outlet Caixin reported that Yunnan Tin had become the first provincial state-owned enterprise to put the framework into practice by striking a debt swap agreement with China Construction Bank, one of China's "Big Four" state-controlled banks. Several other enterprises will likely soon follow Yunnan Tin's lead; China Construction Bank has reportedly begun talks with at least 50 companies. Though Yunnan Tin's precedent sheds light on many aspects of the debt-to-equity swap protocol, it does not clear up the fundamental questions of how and why companies are selected for the program. ...

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