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China says debt-for-equity programme not finalised, will exclude "zombie firms"

[BEIJING] China's ability to boost economic growth is vital for lowering debt levels, a banking regulator official said on Thursday.

Banks' bad loan ratios are rising but are still at relatively low levels, the official said, adding that banks have written off 2 trillion yuan (S$406.92 billion) worth of bad loans in the past three years.

A debt-for-equity swap programme that would help ease company's debt burdens and let banks convert bad loans must follow market and legal principles, a state planning official said.

"Zombie firms" and companies with poor credit records will be excluded from the debt-to-equity swap programme, the official said, adding that the plan has yet to be finalised.

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Chinese commercial banks' non-performing loans (NPLs) rose to an 11-year-high of 1.4 trillion yuan, or 1.75 per cent of total bank lending, by end-March, data from the country's banking regulator showed.

China's central bank is investigating the accuracy of NPL data at banks, underlining policymakers' concerns about rising debt in the country.