Problems and Countermeasures Analyses of Market-oriented Debt-to-Equity Swaps in China

In 2016, for the sake of addressing the high leverage of non-financial enterprises and the persistently high number of non-performing loans in commercial banks, the State Council once again proposed market-oriented debt-to-equity swaps. This round of debt-to-equity swaps exhibits distinct characteristics of marketization and legalization and has played a significant role in improving the financial market environment, reducing corporate debt burdens, and achieving deleveraging goals. However, during the implementation process, there are still many practical problems that prevent the fundamental resolution of difficulties. This paper conducts an in-depth analysis of the issues related to market-oriented debt-to-equity swaps and proposes targeted suggestions to establish a more comprehensive institutional framework, aiming for a win-win cooperation among enterprises and banks.