China Changing State Firms' Debt Into Equity

BEIJING, August 3 (Xinhua) -- Wang Wanbin, vice-minister of the State Economic and Trade Commission (SETC), told a news conference here today that a special company has been set up by the government to clean up bad debts.

The Cinda Assets Management Corp. has already begun helping the China Construction Bank to write off bad loans and three similar assets management companies are being set up.

These financial assets management companies will manage bad loans of commercial banks and change part of them for equity of certain firms. They will hold the shares of these firms for a period of time and have a say in their decision-making process. When their efficiency improves, the management companies can withdraw their shares.

Wang did not provide greater details about the amount of debt to be converted to equity, but said that it will be determined by the actual operations of the asset management companies and the application process.

Priority will be given to large state-owned enterprises that were of strategic importance or involved in key construction projects, Wang said, adding that it is very important to eliminate financial risk and relieve the burden of enterprises and to seriously select and check out candidates.

SETC has revealed the requirements for applying, which include having products with market potential, advanced equipment or technology, a comparatively high management level, and competent managers and leaders. (Xinhua)