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| The Characteristics, Difficulties and Operate Selections in Market-oriented Debt-to-equity Swap |
| WANG Guogang
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| The School of Finance,Renmin University of China/China Financial Policy Research Center |
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Abstract Market-oriented debt-to-equity swap is an important move, which is introduced by Chinese government in 2017, targets to decreasing the enterprises' leverage ratio. Comparison to the debt-to-equity swap operates in the process of disposal of commercial banks' non-performing assets in 1999, the recently debt-to-equity swap has some new characteristics in following areas: its purposes of operations, internal mechanisms, market conditions, object enterprises, object assets, and operating flexibility. There are series of difficulties in market-oriented debt-to-equity swap, mainly performed in operation mechanisms, related-transaction, and operation risks.Current operations of debt-to-equity swap do not truly implement the market-oriented; them, at best, introduced some market-oriented measures within the commercial banking system. In order to truly carry out the debt-to-equity swap that is based on “market-oriented”, it must deepen the reform, courage to innovation, implement the open-to-inside policy orientation, permit various domestic operating agencies to operate debt-to-equity swaps; enhance the competition mechanism in the process of debt-to-equity swaps, upgrade the transparency and fairness in the transaction of loaning assets; make use of various financial channels to support the equities trading after the debt-to-equity swaps, then enhance the role of debt-to-equity swap in reducing the object enterprises' leverage ratio.
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Received: 20 December 2017
Published: 01 January 1900
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