China's State-owned Debt-equity: Motive Status And Ways

This Paper, based on data collected in state-owned enterprises' in china, estimates non-performing debts and give an analysis of the causes of NPD in SOEs. The coverage of debt-to-equity swap should be the marginal non-performing assets among enterprises' debts. Only when the debt-to-equity swap is accompanied by strategic withdrawal of the state economy from the enterprises can such negative effects be avoided, and the corporate governance problem be settled once and for all. So the debt-to-equity swap should not be used as a way to release state-owned enterprises from interest burden, but as a way for the state economy to withdrawal from the enterprises.In Part 1, After an overview of the development occurred in the area of capital structure theory, it establish the theoretical foundation for the paper.In Part 2,the author discusses the internal motivation of putting the debt-to-equity into practice.In Part 3, the author have drawn an conclusion that the cause of over-heavy burden of liability on SOEs is not lack of direct financial sources. This shows SOEs strong preference for bank loans . The ease of the pressure on repayment of enterprises by government and banks and the softening of self-restraint on the loan repayment by SOEs relate with deep-rooted system problems such as mixed government and enterprise functions, and unclear property rights.In Part 4, the author pointed out that the coverage of debt-to-equity swap should be the marginal non-performing assets among enterprises' debts. In the transfer game may be occurred between bank assets management corporation and policy maker as one side and firm, local authority and subordinate as the other side.hi Part 5, the author suggested that if the credit risk could be truly escaped by the bank, and could be shared by public, the process of swaps should be linked with capital markets or out-side investors, which step into the second stage of swap .