Research On Debt-equity Swaps Of China's Commercial Banks

In recent years,China's macroeconomic growth rate declined and the economic growth pressure of China is heavy.Many enterprises,especially state-owned enterprises,face the problem of high leverage and insufficient profit growth.On the other hand,the impact of business difficulties on commercial banks is the deterioration of assets quality and the rapid rise of non-performing loans.In this background,market-oriented debt-equity swaps dominated by commercial banks emerged in response to China's supply-side structural reform and deleveraging calls.On October 10,2016,the State Council formally issued Opinions on Actively and Steadily Reducing the Leverage Rate of Enterprises and Guiding Opinions on Market-Oriented Debt-Equity Swaps,which means the market-oriented debt-equity swaps emerged.This round of debt-equity swaps is dominated by commercial banks,following the principles of legalization and marketization.Since the introduction of market-oriented debt-equity swaps,relevant government agencies in China have actively issued supporting documents to advance the implementation process.At present,this round of debt-equity swaps has made good progress.This paper takes the market-oriented debt-equity swaps dominated by commercial banks as the research object,introduces the meaning and theoretical basis of debt-equity swaps,introduces the implementation background of market-oriented debt-equity swaps,then compares the differences between this round of debt-equity swaps and the first round of debt-equity swaps.In addition,this paper evaluates the market-oriented debt-equity swaps from the perspectives of companies,commercial banks and macroeconomics on the case of Yunnan Tin.The conclusions of this paper were reached: This round of debt-equity swaps is more flexible,and the characteristics of marketization can be expressed in the selection of companies,sources of funds,pricing methods,exit methods,etc.This round of debt-equity swaps fully utilizes the resource allocation role of market.If risks can be properly controlled,through this round of market-oriented debt-equity swaps,the bad loans risk of commercial banks could be mitigated,the debt pressure of companies could be reduced,and the companies' assets and liabilities structure could be optimized.This round of market-oriented debt-equity swaps is an important measure for China's macroeconomic to reduce leverage and prevent risk.Enterprises participating in this round of market-oriented debt-equity swaps should make full use of the debt reduction opportunity,focus on management,improve profitability,improve corporate governance,and establish a modern enterprise system to help achieve the ultimate goal of market-oriented debt-equity swaps.However,at the same time,market-oriented debt-equity swaps also face unfavorable factors such as information asymmetry risk,management risk,and exit risk,which need to be continuously improved.