MORE than 30 highly-leveraged State-owned enterprises (SOEs) have drawn up new plans to cut debt, the China Securities Journal reported yesterday, as part of a plan to cut debt ratios in the State sector by 2 percentage points by 2020.

China is in the middle of a corporate restructuring program aimed at reducing debts and improving the performance of its huge State-owned sector.

Since the reforms began in 2015, the government has pushed through several big industry mergers, closed down dozens of “zombie” enterprises and allowed new ownership structures and debt-to-equity deals that will see more private capital injected into State firms.

The 96 giant firms now administered by the Central Government are under pressure to cut their total debt ratios by 2 percentage points by the end of the decade.

According to the latest Ministry of Finance data, total debts among China’s State-owned firms amounted to 112.2 trillion yuan (US$16.36 trillion) by the end of July, up 8.8 percent year on year. The total debt amounted to 64.9 percent of assets, down 1 percentage point compared to last year.

New guidelines published by the State Council last week said China would establish a system enabling financial institutions to take action against State-owned enterprises when their debt-asset ratios exceeded warning lines, which range from 60 to 70 percent depending on the sector.

Amid concerns about rising local government debt, the guidelines also prohibited authorities from “disguising” liabilities by borrowing through corporate debt channels.

(SD-Agencies)