President Xi Jinping has announced that the Chinese central government will apply stronger constraints to the balance sheet growth of state-owned enterprises (SOE), as well as called for heavily indebted companies to reduce their debt-asset ratios.
At a meeting of the Central Comprehensively Deepening Reforms Commission held on 11 May, Xi called for the “strengthening of constraints on state-owned enterprise balance sheets,” as a key measure for “advancing the deleveraging of SOE’s and preventing and dissolving SOE debt risk.”
Xi also called for “the debt-asset ratios of heavily indebted SOE’s to return to rational levels as soon as possible,” as well as “the integration of improvements to internal governance and the strengthening of external constraints, and the strengthening of supervision and regulation via the establishment and improvement of SOE balance sheet constraints.”
The meeting also emphasised the need to “advance concentrated, unified regulatory trials of the state-owned assets of central party and government organs and public institutions…uphold the separation of politics and enterprise, politics and assets, the division between ownership rights and management…establish state-owned capital operating platforms, optimise the structure of state-owned capital, raise the efficiency of the allocation and regulation of state-owned assets, and effectively prevent the loss of state-owned assets.”
Last year Beijing said that heavily indebted state-owned enterprises would be the “priority of priorities” for its ongoing deleveraging campaign.