Research On The Leverage Of Iron And Steel Enterprises In China

Since the implementation of the four trillion plan in 2008,there have been serious overcapacity phenomena in China’s cyclical enterprises,and the leverage rate has been too high in the real economy.In 2016,President Xi proposed a new strategy for structural reforms on the supply side,and identified the key economic tasks of "three visits,one drop and one supplement".As a traditional cyclical industry,iron and steel enterprises have a long-term imbalance between supply and demand and a serious surplus of production capacity.The scale and debt ratio of their liabilities rank the top three among industrial enterprises.The iron and steel industry has become a key industry that needs to be de-leveraged.With the advancement of capacity-reduction in the steel industry,the high leverage ratio of iron and steel enterprises has been initially controlled under the condition of increased profits,but there is still much work to be done to achieve a reasonable level of leverage.Iron and steel enterprises are important midstream industries in China’s economic development and support the development of the entire national economy.As a typical high-leverage industry,the problems encountered by the steel industry are not only related to the development of the company itself,but also pose threats to the upstream and downstream enterprises and affect the development of the entire real economy.The high leverage problem of iron and steel companies has caused the country’s high attention.In order to respond positively to the "delevering" task proposed by the Central Economic Conference,steel companies have adopted various methods to reduce the debt ratio of enterprises.In November 2016,the Ministry of Industry and Information Technology specified in the "Iron and Steel Industry Adjustment and Upgrade Plan(2016-2020)" the task of "actively and steadily de-capacity to leverage".In March 2017,China Steel Association and China Securities Regulatory Commission held the first de-levering meeting in Nanchang.The meeting proposed to use 3-5 years to push the industry’s leverage ratio down to below 60%.This article starts from the macro background and proposes an analysis of steel enterprises’ deleveraging based on current realities.Through the collection and reading of relevant documents at home and abroad,we have learned about the current research on deleveraging in the steel industry,and summarized the existing research,and conducted research on this basis.At the same time,the concept of deleveraging in the steel industry is defined,and the related capital structure,capital cost,and industrial transformation and upgrading theory are studied to support this study.By studying the development of industrial policies in the iron and steel industry and the reform of China’s financial system,grasping the direction of industrial policies and the problems in the steel industry,we summarize and look forward to the actual and possible role of financial instrument innovation in the actual deleveraging of enterprises,and go for the Chinese steel companies.Leverage provides new ideas and new options.This paper investigates and studies the G Steel Company,which is facing the debt problem,and learns about the actual situation of the company through site visits and interviews.It also collects relevant data and data from the company,analyzes the company’s financial status and business status,and faces The study of the debt dilemma shows that G Steel Company has problems such as weak solvency,unreasonable capital structure,and a single financing method.In combination with the actual situation of the industry and the company,the reasons for the high leverage ratio of the company are analyzed from the external factors and internal factors.Finally,combined with the analysis of G Steel’s actual situation,G Steel’s de-leveraging need not only solve the short-term debt problem,but,like most steel companies in China,it needs to transform and upgrade the product structure and the enterprise as a whole in order to enhance the company’s source at the source.Profitability enables the long-term healthy development of the company.Therefore,this paper proposes the G-steel’s deleveraging scheme from the aspects of industrial transformation and upgrading and direct deleveraging.The industrial restructuring and upgrading mainly aims at the problems of weaker profitability and insufficient competition of G Steel and the lack of demand for the large environment,and puts forward plans for product upgrading and industrial chain integration,and puts forward reasonable proposals and safeguard measures for the implementation of the plan.Under the guidance of the overall principle,the direct deleverage plan proposes several feasible solutions.It comprehensively compares national policies,capital costs,and implementation efficiency and selects the most suitable deleveraging solution for G-Steel as the issuance of convertible bonds and design.The specific implementation plan and expected implementation results of convertible bonds.This paper,through the study of the overall situation of the steel industry and the analysis of case companies,designs and selects the deleveraging program that is most suitable for the case companies,provides a reference for companies like G Steel to deleverage,and shows that steel companies need to The actual situation is reasonable to leverage.The deleveraging of iron and steel companies is still in progress.The innovative enterprise deleveraging method presented in this paper is only intended for a single company and has not yet formed a mature application model that applies to the entire system.Moreover,there are few research literatures about deleveraging in academic circles,and the collected data and data are not complete.The research in this paper is not mature enough.The research and selection of innovative schemes for deleveraging in China’s steel enterprises still needs further research and discussion.