China says it will cut banks’ reserve ratios to support debt-to-equity swaps
Government will also allow firms to tap capital markets, and speed up the elimination of zombie firms
China will use policy tools such as targeted cuts in banks’ reserve requirement ratios to support debt-for-equity swaps this year as it seeks lower corporate debt levels, the country’s state planner said on Wednesday.
“We will use monetary policy tools, including targeted RRR cuts, to actively provide stable, low-cost medium- to long-term funding for market-based debt-for-equity swaps”, the National Development and Reform Commission said.
The government will also let firms tap capital markets, including raising funds via initial public offerings, to help their debt-to-equity swaps and deleveraging, and speed up the elimination of zombie firms, indebted or loss-making companies that need government support to continue operating, the commission said.
The central bank last cut reserve ratios in June – the third this year – to support debt-for-equity swaps and boost credit support for small firms.
