China strengthens debt control for local SOEs

Aerial photo taken on Sept. 27, 2020 shows the science and technology park along the bank of the Dasha River in Nanshan District of Shenzhen, south China's Guangdong Province. (Xinhua/Mao Siqian)

China's top state-asset regulator issued a guideline Friday on strengthening the debt risk control of local state-owned enterprises (SOEs) to effectively prevent and defuse major risks.

Local state-asset regulators should accelerate the establishment and improvement of monitoring and early-warning mechanisms to accurately identify debt risks of local SOEs, said the guideline released by the State-owned Assets Supervision and Administration Commission.

Local SOEs with prominent debt risks should be emphasized in supervision and special regulatory measures should be adopted, while constraints should be made on the size of debt and the asset-liability ratio of highly-indebted firms.

The guideline also urged local state-asset regulators to prioritize work on preventing local SOEs' bond defaults and strictly prohibit them from escaping fulfilling debt obligations.

It also required local state-asset regulators to ramp up control over the firms' use of debt financing funds and improve their anti-risk capability by deepening reforms.