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China to publish debt-to-equity plan soon: media

[SHANGHAI] China could allow industrial firms to convert their debts into equity stakes as early as next month, with the government now putting the finishing touches to a new plan, the official China Securities Journal reported on Monday.

The newspaper said China's cabinet, the State Council, was currently finalising plans to allow "firms in the real economy with development potential" to convert their debt into equity.

Debt has emerged as one of China's biggest challenges, with the total load rising to 250 per cent of gross domestic product (GDP) last year. The International Monetary Fund warned in June that China's high corporate debt ratio of 145 per cent of GDP could erode economic growth if not addressed.

In a bid to rejuvenate its economy, China is aiming to eliminate failing, debt-ridden firms, but it has also pledged to help "restructure" struggling firms that still remain competitive.

Officials have insisted that the new debt-to-equity programme would not be used to prop up so-called "zombie enterprises", those that would not survive without life support from local banks and governments.

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