It should have been the top business story of the week - the setting up of a new company that had swapped its debt for equity, the first of 600 big state firms that are due to be restructured in this way in order to restore them to financial health. Last Wednesday, a Beijing cement plant announced it had been turned into a new corporate entity called Beijing Cement Factory, with registered capital of 963 million yuan (about HK$895.5 million), with 28.6 per cent held by its original owner, the Beijing Building Materials Group, and the rest held by the financial institution to whom it owed money, Cinda Asset Management. By swapping debt for equity, the company is saving more than 100 million yuan a year in interest payments and its debt-asset ratio has fallen from 80.5 to 31.7 per cent. Thanks to the change, it is predicting a profit this year of 15 million yuan. The programme, launched in April last year with the setting up of Cinda, is one of the most important government initiatives to help the ailing state sector and to enable state companies to compete in the new economic order once the mainland has joined the World Trade Organisation. But the announcement on Wednesday went virtually unreported. Foreign reporters were barred from the news conference and only a handful of domestic papers carried the news. The People's Daily on Friday gave it a single paragraph. One report, in the Beijing Morning News, said the cement company would cut staff and raise efficiency in order to make better use of its non-performing assets. But it is not clear how the new company will differ, if at all, from the old one and what the restructuring will mean in terms of lower staff or disposal of non-core assets. A company spokesman said its general manager and chairman would be the same as before, although both come from the building materials group which has become a minority shareholder. He declined to comment further. A Cinda official, asked why Cinda could not make appointments to these two positions despite having a controlling stake, said there were many factors. 'We at Cinda cannot decide on our own. We cannot appoint the chairman but will have an important say in how the firm is run.' Asked how the firm would improve as a result of the restructuring, he said he could not answer and advised us to read more newspapers and government documents. The plant should do well. Built between 1993 and 1995, it is one of the most modern of mainland cement factories, with equipment from Switzerland and Germany. It sells everything it produces. French building materials giant Lafarge has repeatedly tried to buy it, but in vain. Its problem was that the cost of building the plant more than doubled from a budgeted 393 million yuan to 818 million yuan, most of it bank loans, leaving it with a debt burden it could not bear. So a debt-equity swap seems a good way to turn the company round. So why all the secrecy? One reason is that these swaps have turned out to be more complex than the government initially thought. The cement plant signed the agreement with Cinda on September 2, but the State Council approved it only at the end of May, one of the first batch of 62 to be approved. So far, 600 state firms have signed agreements to transfer debts totalling 459.6 billion yuan to Cinda and three other asset management companies (AMCs) - one for each of the four major state banks, each of which carries an enormous burden of bad debt. The State Council's hesitation is due to the difficulty of valuing the assets of the firms, uncertainty over exactly who owns them and a shortage of qualified staff to take them over. The firms are under the control of different arms of city and provincial governments and restructuring them involves their economic interests, making it a delicate political matter. The reluctance to publicise the programme is due to fear of public anger over unemployment. When people read in the newspapers about 'reform of state companies', they take it to mean lay-offs and cuts in medical, housing and pension benefits of those working there. But the secrecy fuels public suspicion that the swaps will not result in genuine restructuring of the companies or changes in their management and will be a way to move the debt from one pocket of the government to another, allowing those who managed the indebted firms to escape criticism or punishment for their failures. Other parts of the programme have gone better. In the first auction of assets, Cinda last November raised 70.67 million yuan in Shenzhen. In May, another of the AMCs auctioned 6,028 square metres of retail space in a Guangzhou shopping centre for 55 million yuan. In late June, the AMC that is taking over the bad debts of the Agriculture Bank raised 16.4 million yuan from leasing factories, shops, restaurants and hotels to 15 companies in Dalian, the first time such assets have been leased. Among them was 140 hectares of sea water, for which farmer Pu Jiping is paying 10 million yuan for a six-year lease, with an initial down-payment of three million. 'I will breed shrimp, abalone and scallops there,' said Mr Pu. 'Demand for these items is heavy. I prefer to pay by instalments. I am confident that I will be able to make a good return.'