Chinese central and the local governments have taken
inconsistent approaches over the country's RMB1 trillion ($149
billion) debt-to-equity swap policy, and the execution of swaps
under the programme.
The State Council, China’s cabinet, released a
policy paper on July 18 giving its green-light to the
much-debated debt-equity conversion programme. This was
followed by a new document issued on August 22 urging
non-financial enterprises, such as suppliers, to swap their
accounts receivable for equity in their indebted clients.
But counsel in China point to misalignments between the
central government and municipal authorities over what
enterprises should be allowed to conduct swaps, and how they
should be carried out.
"The key hurdle to the government-supported swaps is whether
they will be conducted according to policy guidelines or to the
Tiecheng Yang, partner at Clifford Chance in
PRC financial institutions had created RMB2 trillion worth
of NPLs by...