The Chinese government has approved a programme that will allow struggling companies’ bank debt to be swapped for equity, as Beijing moves to address growing concerns over the country’s massive debt pile.
The State Council signed off on debt-for-equity swaps — the subject of a fierce policy debate this year — as part of a broader effort to reduce corporate indebtedness in the world’s second-largest economy. Chinese companies have accumulated about $18tn in debt, an amount equivalent to 170 per cent of gross domestic product.
The State Council said it would also encourage mergers, bankruptcies and debt securitisation to help reduce leverage across the corporate sector.
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