State-owned enterprises to leverage further assets and liabilities will meet rigid constraints

Recently, the Second Meeting of the Central Deep Reform Commission deliberated and adopted the "Guiding Opinions on Strengthening the Asset-Liability Constraint of State-Owned Enterprises". The "Guidance Opinion" proposes that we must adhere to the combination of full coverage and classified management, improve the combination of internal governance and strengthening of external constraints, and establish and improve the state-owned assets and liabilities constraint mechanism, strengthen supervision and management, achieve both the symptoms and the root cause, and promote high debt The asset-liability ratio of state-owned enterprises has returned to a reasonable level as soon as possible.

The second meeting of the Central Committee for Comprehensively Deepening Reforms recently held reviewed and adopted the "Guiding Opinions on Strengthening State-owned Enterprises' Assets and Liabilities Constraints." The meeting pointed out that the strengthening of state-owned assets and liabilities constraints is an important measure to promote the reduction of leverage of state-owned enterprises and prevent and resolve the debt risk of state-owned enterprises.

“The current debt management is a basic feature of modern companies. The financial leverage of debt can enable companies to achieve the best capital structure, thus achieving the largest market value, but too high debt will also bring business risks.” Research Center of State-owned Assets Supervision and Administration Commission of the State Council Associate researcher Zhou Lisha said in an interview with the "Securities Daily" reporter that if the debt ratio of state-owned enterprises rises further, it will inevitably accumulate more contradictions and problems in our country's social operation and economic development. Therefore, reducing the state-owned asset-liability ratio is in line with the current development needs of China's objective economic situation.

The meeting emphasized that we must adhere to the combination of full coverage and classification management, improve internal governance and strengthen the combination of external constraints, and establish and improve the state-owned assets and liabilities constraint mechanism, strengthen supervision and management, so as to achieve both the symptoms and the cause, and promote high-liability state-owned enterprises. The asset-liability ratio returned to a reasonable level as soon as possible.

According to Liu Xingguo, researcher of the Research Department of the China Enterprise Confederation, “full coverage” refers to the need to include all state-owned assets in the scope of supervision to ensure that all state-owned assets are effectively supervised. “Classification management” refers to the adoption of targeted regulatory measures in accordance with the characteristics of different state-owned assets, including the classification of operating and non-operating state-owned assets, the classification of financial and non-financial assets, and the corporate level. The classification of public welfare state-owned enterprises and commercial state-owned enterprises.

Lisa Li said that the industries with high state-owned assets and liabilities currently are mostly capital-intensive industries. They are highly leveraged and are prone to overcapacity when demand is weak. Therefore, it is necessary to categorize and strengthen state-owned assets and liabilities, such as increasing the capacity of state-owned enterprises to produce, and promote the orderly reduction of the debt ratio of state-owned enterprises by advancing mergers and acquisitions, perfecting modern enterprise systems, and implementing enterprise bankruptcy according to law.

In fact, in recent years, in order to reduce the debt ratio of state-owned enterprises, the regulatory authorities have issued a number of measures. For example, the State-owned Assets Supervision and Administration Commission of the State Council has strengthened the management of foreign investment by central enterprises, strengthened the participation of central enterprises in the management of PPP projects, promoted the conversion of market-denominated bonds, and introduced strategic investors through capital increase and mixed reforms. From the overall situation, reducing the debt ratio of state-owned enterprises basically achieved the desired results.

According to the latest data from the State-owned Assets Supervision and Administration Commission of the State Council, as of the end of March this year, the average asset-liability ratio of central enterprises was 65.9%, a decrease of 0.4 percentage points from the beginning of the year. At the same time, the debt situation of local state-owned enterprises has also improved.

Peng Huagang, deputy secretary-general of the State-owned Assets Supervision and Administration Commission of the State Council, said that the deleveraging efforts of central enterprises will be further strengthened this year. At the same time, the SASAC will further implement classification management and control, strengthen work supervision, and increase the assessment of leverage reduction and debt reduction work to ensure the implementation of the de-levering task this year.