Risk Analysis & Elusion Of Chinese State-owned Enterprises Debt-in-lieu-Equity Operation

This paper focuses its research on the risks relating with Debt-in-lieu-Equity operation in our state-owned enterprises. The main aim such a research tries to achieve is: (l)With the investigation into the basic principles and international practices of Debt-in-lieu-Equity, to provide us with some valuable suggestion on the risk analysis and its shunning, when we undergo the operation of Debt-in-lieu-Equity. (2)To analyze the necessity and reality of the policy choice of state-owned enterprises Debt-in-lieu-Equity; (3) With some specific theories and some investigations into the project design and its corresponding applications of our state-owned enterprises Debt-in-lieu-Equity, to perceive the latent risks and its forming mechanism;(4) Beginning from the point of our country's special system background and the country's situation, to explore the deep root of risks existing in the operation of Debt-in-lieu-Equity; (5) Bring forward some fundamental ideas and reasonable counter-measures to shun the risks of our Debt-in-lieu-Equity on the basis of former researches.We synthesize the former researches and advance some more effective hypothesis about human's behavior, whic h may contribute to this research: 1. Generally man would pursue his benefits to uppermost extent 2. bounded rationality. 3. Tendency for opportunism. The theoretical preparations for such a research involve fully country theory, Principal-Agent theory, property right and market competition theory, which have served as the reference for further analysis. Under such a theoretical frame, this paper applies mainly the method of qualitative analysis, which is complemented by other methods such as quantitative analysis, social benefit-cost analysis, induction and deduction, comparative analysis. With a thorough and systematic research on the projects of our state-owned enterprises Debt-in-lieu-Equity, drawing the conclusion as follows:The general principles and the international practices of Debt-in-lieu-Equity offersome beneficial references and inspirations to our country, when it deals with the problems of bad loan-liability occurring between the state-owned banks and state-owned enterprises.It is a practical option based on the situation of China to apply the project of Debt-in-lieu-Equity in the state-owned enterprises.The project of Debt-in-lieu-Equity is a market conduct dominated andpropelled by the government In its policy design, it is characteristic prominently of the combination of policy domination and marketability in its operation.The great risks inherent in the operation of Debt-in-lieu-Equity is also embedded in every step of its application.By throwing penetrating light on the root of risks, we may conclude briefly that they are: the problems of the state-owned property; the "over-supply" and "insufficient-supply" by the government coexist; the absence of advanced capital marketConcluding above researches, we may get down to the main context of risks eluding as such: exploring the deep root of risks in order to depress the stimulation for the opportunism of the market participants. The basic ways would be that: to deal with effectively the deficiencies which the stock shares in the operation of Debt-in-lieu-Equity inflict upon the administration capability, to optimize the corporation governance-structure in the state-owned enterprises should be the core measures in the risks shunning operation. The market-oriented operation should be the proper and fundamental choice in the practice of Debt-in-lieu-Equity. We should accelerate the development of the capital market in order to provide material foundation for the normal withdrawal of stock share, for fullexertion of the function of market mechanism . Furthermore, considering fully the situation of our country, we bring forward more specific countermeasures.