Where Is The Advantage Of Debt To Equity Swap And "Good"?

China's economic growth is slowing down. We need not be pessimistic.

The government's policy should achieve a certain balance between ensuring growth and structural adjustment, both of which should not be neglected.

Now that our economy is down like any other country, when the economy is down, that is, when the economy adjusts, the government can do more beneficial things, and the reform of state-owned enterprises can also move forward.

The high debt of state-owned enterprises is not formed in one day, but a product of China's macro economic cycle.

Generally speaking, when the economy is in the macro economic upswing period, the capital operation speed of the enterprise is accelerated and the debt rate has decreased.

When the economy is in the downside of the macro economy, the order of enterprises will decline, the speed of capital operation will decrease, and the debt rate will rise.

China's economy has entered a period of nearly ten years of economic prosperity since the second half of 2003. The debt ratio of enterprises has declined considerably, and state-owned enterprises are no exception.

However, since 2012, China's economy has entered a new round of boom and downturns. The debt ratio of enterprises has no longer declined, and the debt ratio of state-owned enterprises has increased considerably.

Deleveraging is one of the priorities of last year's central economic work conference. However, there is no consensus on how to leverage, whether policymakers or academics.

Many people believe that controlling currency issuance is the key to deleveraging.

However, one of the most important lessons of the great depression in 1929 is that excessive control of currency issuance during the economic downturn will lead to further downturns in the economic boom.

In addition, control

It can not solve the stock problem, especially the problem of explicit and potential bank bad debts.

It is worth noting that the rise in debt of state-owned enterprises is not the first time.

Since the outbreak of the Asian financial crisis in 1997, China's economy has entered a downward period of six or seven years, and the debt of state-owned enterprises has increased rapidly.

At that time, the bad debts of banks reached 1/4 of GDP in China, which is much more serious than it is now.

Our government has taken decisive measures to set up four major State-owned Assets Management Corporation, accepting bad debts of the four major state-owned banks, and converting bad debts into state-owned shares owned by Asset Management Co.

Through such a debt to equity swap operation, not only banks and state-owned enterprises have been able to travel lightly, but the leverage ratio of the whole economy has also declined significantly.

Looking back, this round of debt to equity swap has laid a solid foundation for the rapid growth of our economy in the past 2003-2012 years.

In fact, thanks to the high economic growth during this period, the state-owned assets of the four Asset Management Co have substantially increased.

China's current

It is several times stronger than 1997-2002 years ago, but in terms of the economic cycle, the current downturn and the downturn are essentially the same.

The downturn is not terrible. It is an essential means for an economy to regulate itself, just as a person has to use fever to overcome the bacteria in his body.

The last round of structural adjustment has shown us that it is feasible to clean up excessive liabilities of enterprises in the form of debt to equity swap.

Unlike the previous round of adjustment, the current round of adjustment can combine the two major tasks of mixed pformation and reduction of state owned enterprises, and promote the mix up of state-owned enterprises and the decrease of leverage ratio by debt to equity swap.

Thanks to the extraordinary growth over the past 2003-2012 years, China has accumulated huge amounts of national savings, and its stock has reached 40% of the world's total savings.

Most of the savings are owned by residents and enterprises. How to make good use of these savings is a problem that our country must take seriously for a long time. Japan's experience in the 80s and 90s of last century is a lesson from the past.

Faced with this problem, the answer is to turn savings into a stable income stream.

Mixed pformation of state-owned enterprises is one of the means to achieve this goal, and debt to equity swap provides a good opportunity for this purpose.

In the last round of adjustment, State-owned Assets Management Corporation played a major role, but in the current round of adjustment, this role can be borne by private capital.

The government can allow private capital to set up Asset Management Co and accept bank stripping.

And it can be converted into state-owned shares held by Asset Management Co. For some enterprises with more bad debts, banks can be allowed to write off some debts.

The conversion of state-owned enterprises in the form of debt to equity swap is an arrow and three carving. It not only pushes forward the reform of state-owned enterprises, but also reduces the leverage ratio of the economy. It also provides an investment opportunity for private capital.

The resistance to debt to equity swap may come from two concerns, one is the loss of state assets and the other is that state-owned enterprises do not have to bear responsibility for poor management.

In order to deal with the first worry, the operation of debt to equity swap must be open and pparent. When the bank divestiture state-owned debt, it is better to use the bidding method to pfer the debt to the private Asset Management Co.

Whether state-owned or private, the assets of enterprises ultimately belong to the society. Excessive emphasis on the attributes of assets is harmful and useless.

As for the second worry, we must realize that the mismanagement of state-owned enterprises is a result of past mistakes. Therefore, it is a sunk cost that society must accept. Strengthening the corporate governance structure of state-owned enterprises through mixed reform is precisely the key measure to prevent future mistakes.

Therefore, debt to equity swap is an important opportunity to promote the reform of mixed ownership in state-owned enterprises.