(Yicai Global) April 16 -- Deleveraging has been a key task for China’s state enterprises over the past few years.
Debt at these firms fell 0.4 percent in the first quarter to continue a years-long drop, but only by 0.3 percent to 0.4 percent a year, and more efforts should be made, said Peng Huagang, spokesman of the State-Owned Assets Supervision and Administration Commission in a news briefing today.
If the funds and capital in businesses are to be considered as the blood for operations, then to reduce leverage and lower debts can be reviewed as procedures to stanch bleeding and replenish and generate blood, he said.
To stop bleeding is to further clean up bad assets. SASAC has been working in this field. This is significant because it will bandage the still-bleeding wound after disposing of the bad assets. To strictly control the funds and capital, as well as high-risk businesses and debt investments, is likewise to stem the effusion of blood.
To replenish blood is to expand equity financing through the capital market and debt-for-equity swaps, and to introduce various types of capital for mixed-system and diversified shareholding reforms. Mixed-ownership reform is good for deleveraging, with the integration and development of various types of capital, as well as bringing in capital.
Therefore, more efforts should be made in this area. However, neither blood replenishment nor blood transfusion have anything to do with government. It is a completely market-oriented mechanism for raising capital.
“As China opens further, cooperation between central enterprises and those under various types of ownership, including foreign-funded firms, will become closer,” Peng said.
China will further improve quality and efficiency in its business operations, enhance management and the efficiency of capital use, boost value-creation capabilities, and increase business accumulations to generate blood. SASAC will meantime further classify management, strengthen work supervision, and enhance the assessment of deleveraging and debt reduction to ensure the implementation of the deleveraging tasks this year.