The head of the State-owned Assets Supervision and Administration Commission (SASAC) says that the debt levels of China’s central state-owned enterprises are “under control and gradually declining.”
“At the end of 2017 the total assets of central SOE’s were 54.5 trillion yuan, for an average debt-asset ratio of 66.3% and a decline of 0.4 percentage points compared to the previous year,” said Xiao Yaqing (肖亚庆) at a press conference held on 10 March for the 13th National People’s Congress.
“Total debt was 35.1 trillion yuan, including 9.5 trillion yuan in bank loans, and 3.8 trillion yuan in various securities, short-term and super-short term financing…overall, central SOE debt levels are under control.”
Xiao nonetheless warned that debt remained a risk factor for some central SOE’s and their lower level subsidiaries.
“Some central SOE’s and some second and third-tier enterprises of central SOE’s have high debt ratios, and risk is still present.
“For this reason expanding risk controls, reducing leveraging, cutting down debt and risk prevention will continue to be very important missions for us this year and for some time in the future.”
According to Xiao SASAC has raised the debt control thresholds for China’s state-owned enterprises by five percentage points across various categories, to 70% for industrial enterprises, 75% for non-industrial enterprises and 65% for scientific research enterprises.
Xiao further pointed out that regulators are increasing the accountability of SOE groups with respect to the debt of subsidiaries, and using “category-based controls to cause the overall debt ratio to steadily decline.”
SASAC is also using more stringent assessments to rein in the leverage of central SOE’s, as well as employing various capital supplementation channels such as debt-to-equity swaps.
“Over the past few years various central SOE’s and bond holders have engaged in full negotiations for the use use market-based, lawful debt-to-equity swaps, and already executed agreements of intention worth nearly 1 trillion yuan
“Last year 180 billion yuan were implemented, and this year we must properly use the beneficial opportunities for market-based debt-to-equity-swaps.
“Last year central SOE’s also used various types of market investments to raise 357.7 billion yuan in funds for capital supplementation, and this year we will further increase their vigour.”