What is the risk of high state-owned enterprise debt?

Source: China Business News Reporter: Liang Weiwei Date:2012-11-29

ADB data shows that the top ten corporate bond issuers are all state-owned enterprises

A few days ago, research institutionGK Dragonomics’s statistics show that China’s corporate debt accounted for 1% from last yearGDPof108%rising to2012year122%, created nearly15New high for the year. Among them, the performance of state-owned enterprises is worrying, with outstanding corporate debt accounting for more than half of China's corporate debt. Some experts believe that this hidden risk requires sufficient attention.
Data previously released by the Asian Development Bank shows that as of9At the end of the month, China’s total outstanding corporate debt was approximately6Trillion yuan, year-on-year growth20.2%, quarter-on-quarter growth5.0%, mainly driven by growth in commercial bank bonds, local corporate bonds and medium-term notes.
The latest " issued by the central bank2012year10Monthly Social Financing Scale Statistics Report》shows that in10Among the statistical calibers of social financing scale in January, only corporate bond (including bonds issued by local financing platforms) financing data has accelerated growth, which is2992100 million yuan. Before this year10months, corporate bond net financing reached1.86Trillion yuan, higher than2011all year1.37Trillion yuan.
At the same time, data released by the Asian Development Bank also shows that from the perspective of bond issuers, China's corporate bond market is dominated by a relatively small number of issuers. as of9End of the month, the biggest30Corporate bond issuers account for all6One trillion yuan of outstanding corporate debt3.5Trillion yuan, approximately60%’s share, accounted for by the top ten issuing companies2.4Trillion yuan. in the largest30Among the corporate bond issuers,23The family is a state-owned enterprise, as of9There are still outstanding bonds at the end of the month3.1Trillion yuan. The top ten corporate bond issuers are all state-owned enterprises.
“Many of the liabilities of my country's state-owned enterprises are invisible debts. On the surface, there appear to be no bad debts, but in fact there are great risks involved.”Interviewed by a reporter from China Economic Newsw88 casinow88 login, director of the China Capital Operations Research Center, believes that if state-owned enterprises cannot repay their debts, then banks will repay the loans because they are national enterprises and the country does not want to go bankrupt. And most banks are state-owned, so the government will ask state-owned banks to provide blood transfusions to enterprises, which will lead to higher and higher debts. But a large part of the debt has become bad debt and the company cannot repay it.
At the same time, w88 login also pointed out that after a company's debt ratio is high, the risks are still obvious. This will increase the cost of the company and may lead to losses. If losses continue for a long time and the company has no cash inflow, it may go bankrupt. If companies go bankrupt, the macroeconomy may decline.
However, some experts believe the risks may not be that serious after all.
Wang Junfeng, deputy director of the Institute of International Technology and Economics of the Development Research Center of the State Council, said in an interview with a reporter from China Business News that state-owned enterprises have mainly vigorously expanded overseas in recent years, especially large state-owned enterprises, which require a large amount of funds to expand their assets overseas. However, as long as there are no problems in the internal management of state-owned enterprises and there is supervision of overseas expansion, there is no need to worry about the debt ratio of state-owned enterprises.

“The development of state-owned enterprises in recent years, the introduction of modern enterprise systems and the listing of enterprises have promoted the optimization of internal property rights of state-owned enterprises and strengthened the internal supervision of enterprises. The strength and condition of state-owned enterprises are much better than before. State-owned enterprises are developing relatively rapidly now, but they also face management and supervision problems. Competent departments should pay attention to supervision and control expansion risks and the preservation and appreciation of state-owned assets. In this way, the debt ratio of state-owned enterprises should not be a big problem.”Wang Junfeng said.
w88 login said that the good factor is that China's overall debt level is not high, and a considerable part of our country's bonds are issued by state-owned entities and controlled by the state, so the risks are much smaller.
However, w88 login reminded that overall, our country’s debt structure should be optimized at present. Reduce the issuance of bonds with state-owned enterprises as the main body, encourage more dynamic and powerful private enterprises to issue bonds, and realize the marketization of debt. At the same time, the government only needs to formulate a set of regulatory procedures and requirements, without any approval. Approval should be carried out by intermediaries and rating agencies and should be transparent and open.

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