China's corporate leverage ratio is down, debt risk is lower and market-based debt-to-equity swaps had a good start, the country's state planner said on Monday.
China's corporate leverage ratio had decreased to 165.3 percent in the first quarter, and had gone down or held the line for three continuous quarters, according to the latest data from the Bank for International Settlements (BIS), the National Development and Reform Commission (NDRC) said in a statement on its website.
Growing at a slower pace, China's overall leverage ratio had stood at 257.8 percent at the end of the first quarter, with year-on-year increase down 4.7 percentage points compared to the previous quarter, BIS latest data showed, NDRC said in the statement.
As of last Friday, value of debt-to-equity swaps in China had exceeded 1.3 trillion yuan (196.5 billion US dollars), and as of the end of July, the amount of equity financing had balanced at 6.3 trillion yuan (952.1 billion U.S. dollars), said NDRC.
S&P Global Ratings cut China's sovereign credit rating last week. However, it was "a wrong decision" that neglects the country's distinctive financing structure, the wealth-creating effect of the government's spending and its support for growth, as well as the sound fundamentals and development potential of the world's second-largest economy, said China's Ministry of Finance. Experts from China's financial industry also said the timing is "unexpected" and the move reflects "shallow analysis."
China will focus on bringing down leverage ratios for state-owned enterprises, shutting down "zombie firms" to divert credit and production resources to more efficient companies, pushing forward market-based debt-to-equity swaps, and further supporting mergers and acquisitions among firms, said the NDRC.
