East China's Shandong Province has implemented debt-to-equity swaps to support deleveraging, with several swap projects under discussion, an official from the China Banking Regulatory Commission said on Thursday.
Bank of China and Agricultural Bank of China's debt-to-equity programs in Shandong are under discussion, and Bank of China has signed an initial cooperation agreement, Xie Xiaofei, deputy director of the Shandong branch of China Banking Regulatory Commission, said at a conference briefing in -Beijing on Thursday.
The local governments in Shandong have conducted many corporate reorganization deals in recent years, but the current debt-to-equity swaps mainly focus on heavy chemical companies, Feng Liguo, an expert at the China Enterprise Confederation, told the Global Times on Thursday, noting that the banks have large amounts of nonperforming loans.
In addition, which companies deserve debt-to-equity swaps is another issue that local governments need to resolve, Feng said. For example, to preserve tax revenues and GDP growth, local authorities may bail out some firms that should otherwise close down, resulting in a waste of financial resources, he said.
Banks in Shandong have reduced loans to industries suffering from overcapacity and revitalized credit resources in less effective sectors to help optimize the industrial structure, Xie said.
Loans to nine industries with excess capacity, including iron and steel, declined 0.48 percent to nearly 2.7 billion yuan ($393.36 million) in 2016, according to a press release the bureau sent to the Global Times on Thursday.
Banks in Shandong dealt with 135.7 billion yuan in nonperforming loans in 2016, 1.5 times that of 2015.
Meanwhile, the province supported the transformation and upgrade of traditional industries and the development of emerging sectors such as biomedicine, information technology and new energy vehicles, Xie noted.
In 2016, loans to strategic emerging industries rose 17.24 percent. Loans to the next generation information sector and the new energy sector grew 149.19 percent and 25.46 percent, respectively.
