Tame the "grey rhinoceros" state enterprise to reduce leverage

time2017/11/17

Tame the "grey rhinoceros" state enterprise to reduce leverage

The high leverage ratio of China's state-owned enterprises continues to climb, and the chances of a high leverage risk flare up. ZhongCai do game director wang will highly leveraged as a state-owned enterprises of China's financial system is one of the five big potential risks to ash rhino type, the other four grizzly rhino for shadow banking, real estate bubble, local debt, illegal illegal financing, etc.

The three stages of high leverage in state-owned enterprises

The formation of high leverage ratio of Chinese state-owned enterprises is a relatively long and complicated process. The rise in state corporate leverage from low to high can be traced back to the mid and late 1990s. At that time, the state-owned enterprises formed a higher leverage than it is now, in order to resolve the risk of highly leveraged state-owned enterprises, through the policy of the state council launched since 1998, state-owned commercial Banks and state-owned enterprises of debt-to-equity swap operations, after 5 years of operation debts into shares, state-owned enterprises by 2003 the average leverage ratio has fallen to less than 55%.

From 2003-2003, this five years, state-owned small and medium-sized enterprises because of shareholding system reform and listing, leverage ratio has fallen dramatically, state-owned oversize, large state-owned enterprises because of the excessive expansion of assets pursuit, leverage ratio to rise further. The sharp fall in the leverage ratio of small and medium-sized state-owned enterprises and the rise in leverage of the large and large state-owned enterprises have been hedged, and by the end of 2008 the average leverage of state-owned enterprises rebounded to about 58%.

Since 2009, the financial leverage ratio of state-owned enterprises has recovered rapidly. The implementation of the stimulus plan of 2009 to 2010 resulted in the average financial leverage ratio of state-owned enterprises rising by nearly 5 percentage points. State-owned enterprises since 2010 as China's economic downturn intensified management difficulties, financial leverage and pick up nearly 2% on average, by the end of 2016, the average leverage ratio of state-owned enterprises has been more than 65%.

Just the present state-owned enterprise financial leverage, 40% ~ 60% of the state-owned enterprise financial leverage over 90%, 5% ~ 15% of the state-owned enterprise financial leverage over 95%, even some state-owned enterprise financial leverage has more than 100%. If there is no in the state-owned enterprise to consider and calculate the financial statements reflect external guarantee and mutual guarantee, large data such as more than a year of payables, state-owned enterprises actual financial leverage is close to 70% on average.

From 2015 and 2016, the actual effect of state-owned enterprises' deleveraging is far below the policy expectation, and the financial leverage ratio of more than 40 percent of state-owned enterprises continues to climb.

The reason for the high leverage of state-owned enterprises

The formation of the state-owned enterprise high financial leverage, there are many reasons, one of the biggest reason is that state-owned enterprises, especially the super large and large state-owned enterprises long-term capital operation and industrial operation of mixed. In a sense, the capital operation of state-owned enterprises is more than the industrial operation, which can enlarge the scale of assets and achieve the rapid growth of performance. More and more state-owned enterprises are in a hurry to the capital operation, even in the name of capital operating continuously expand the business sector, blindly outward expansion, infinite and expand the scale of assets, lead to the competitiveness of the main business of falling and rising of financial leverage.

It can be said that the high financial leverage ratio of state-owned enterprises not only weakens their own product innovation ability and technological innovation ability, but also is a drag on the development of China's real economy. The high level of financial leverage risk of state-owned enterprises will not only impact the real economy, but also weaken the competitiveness of the real economy. It will also impact the virtual economy and increase the financial risk of commercial Banks. It can also be a drag on employment, leading to a large number of employees losing their jobs; A large number of small and medium-sized non-public enterprises that support its supporting services will be more likely to fail. Therefore, we should make more efforts to reduce the high leverage ratio of state-owned enterprises and take the initiative to prevent the explosion of high leverage risk of state-owned enterprises.

The high leverage of state-owned enterprises is resolved

First, we will step up efforts to promote the reform of mixed-ownership in state-owned enterprises. Mixed ownership reform can introduce incremental capital to state-owned enterprises, effectively reduce their financial leverage ratio and realize the transformation of operating mechanism and management mode. Non-public capital is involved in the reform of mixed ownership of state-owned enterprises, which can acquire the stock of state-owned assets and can also be invested in incremental capital.

From the perspective of deleveraging, it is more beneficial for state-owned enterprises, especially large and large state-owned enterprises to leverage, to promote the reform of mixed-ownership in the form of incremental investment by non-public capital. In the present high financial leverage in the state-owned enterprises, oversize large state-owned enterprise financial leverage are often the highest or higher, therefore, reduce the oversize, large state-owned enterprise financial leverage is more meaningful. Of course, it is also important to see that the majority of non-public capital will not be willing to participate in the reform of mixed-ownership in large and large state-owned enterprises, which will require a certain tilt in policy. For oversize, large state-owned enterprises to implement the mixed ownership reform, allow the creditor bank conditionally execute part payment of creditor's rights of stope, support for its mixed ownership reform after the completion of the listed, reduction of mixed ownership reform of land transfer, asset transactions related taxes and fees, etc.

Need to emphasize that the mixed ownership reform of state-owned enterprises should be combined with the functions of state-owned enterprise capital operation stripping, the functions of the capital operation of state-owned enterprises into state-owned capital investment companies and state-owned capital operation companies, by state-owned financial capital investment companies and state-owned capital operating company implements the specialized operation of state-owned capital. In a sense, only stripping the capital operation function of state-owned enterprises, to promote state-owned companies focus on product development and technological innovation, thereby giving impetus to the international competitiveness of the real economy.

Second, accelerate the implementation of the debt-to-equity operation of state-owned enterprises and commercial Banks. State-owned enterprises, especially large and large state-owned enterprises, are highly leveraged and take loans from state-owned commercial Banks. High leverage is the most important feature of large and large state-owned enterprises. Therefore, the operation of super large and large state-owned enterprises to accelerate the implementation of debt-for-equity swaps can effectively reduce their financial leverage ratio.

Of course, the operation of the debt-for-equity swap should be market-oriented, driven by market forces, and support the agreement between commercial Banks and state-owned enterprises to negotiate debt-for-equity swaps. In addition, the policy will also support the state-owned corporate bonds convertible actions coordinated with mixed ownership reform of state-owned enterprises, allowing the choice of state-owned enterprises is synchronous or mixed ownership reform step by step and debt convertible operation, design to push forward the reform of the mixed ownership of state-owned enterprises, can be the first to introduce non-public capital after debts convertible operation of mixed ownership reform, also can be a mixed ownership reform and debt synchronization of the operation of propulsion; In addition, the government should not interfere with the haggling between state-owned enterprises and debt-to-equity Banks, whether it is a synchronous debt-for-equity operation or a separate debt-for-equity operation.

Third, strengthen the restraint and supervision of state-owned enterprises to go to inventory. The high leverage ratio of state-owned enterprises, especially large and large state-owned enterprises, is closely related to the overproduction of state-owned enterprises and high inventory. The effect of the past two years on the production capacity of the large and large state-owned enterprises is basically a vicious circle that goes to the cycle of inventory, production and inventory. In general, very large, large state-owned enterprises above capacity high inventories are corresponds to the employment, depreciation, debt, etc., based on the corresponding functional departments of the central government and local government employment pressure, will often go to state-owned enterprises capacity inventory to make the compromise and even the default plus production capacity and inventory, leading to the state-owned enterprises to capacity to inventory is invalid or even negative effects. Therefore, should strengthen the state-owned enterprises to capacity to inventory constraints and supervision, to large-sized state-owned enterprises especially large state-owned enterprises to go short of long production inventory goal set, capacity to inventory target to quantify, which truly the state-owned enterprises to implement capacity to inventory.

Fourth, we will implement the responsibility system for the clean-up of state-owned enterprises "zombie enterprises". "Zombie" companies are not normal, there is no management, main business, many "zombie" companies do not produce economic benefits, not only even parent or affiliated enterprise need to continue to inject cash flow and other resources; A large number of "zombie enterprises" are state-owned enterprises, and the state-owned enterprise parent system is the largest "zombie enterprise" carrier in China. State-owned enterprises "zombie" companies to clean up the important reason for the slow progress, because "zombie" companies in the state-owned enterprises and mutual guarantee, cross shareholding system, some "zombie" companies have also raised a large number of loans from state-owned commercial Banks, and even some "zombie" companies can still enjoy the loan amount. Therefore, state-owned enterprises "zombie" companies to clean up must implement the responsibility system, one is to implement the responsibility system of the competent department of the state-owned enterprises, 2 it is to implement the responsibility system for state-owned enterprise management team, 3 it is to implement the responsibility system of commercial Banks, and accountability to the responsibility to the people, responsible to bear the economic responsibility and administrative responsibility. In the implementation of the responsibility system for the liquidation of "zombie enterprises" in state-owned enterprises, the responsibility system of commercial Banks and financial supervisory departments is more important and can play a role.

Fifth, the bankruptcy liquidation system for continuous losses of subsidiaries of state-owned enterprises under grade 3. , large state-owned enterprises, especially the oversize parent-subsidiary system of multi-level corporate governance of state-owned enterprises, led to many levels of state-owned enterprise property rights chain, formed a more level 3, level 4, 5, 6, and even greater levels of subsidiary. Many of the subsidiaries of state-owned enterprises not only have no relation to the main business, but also are often pure virtual operations and even engage in illegal related transactions. These three - level subsidiaries not only take up more resources from state-owned enterprises, but also increase the financial leverage ratio of state-owned enterprises. As a result, state-owned enterprises have to clean up "zombie enterprises" and resolve to clean up their subsidiaries. State-owned enterprises in the process of cleaning level 3 subsidiaries under, the first beginning for several years or years of losses in subsidiary, for successive years or affiliates are not allowed to consolidation in the losses for many years, it is necessary to implement bankruptcy liquidation in accordance with the law. In a sense, the reduced leverage of state-owned enterprises in the bankruptcy liquidation of the serial loss-making subsidiaries is higher than the clean-up of "zombie enterprises".