Debt-Equity Swaps: Too Little, Too Late

Chinese authorities have turned to an old policy tool—debt-to-equity swaps—in an attempt to manage rising corporate leverage. Analysis of all publicly announced swap deals so far reveals that the vast majority of these swaps are used for the most heavily indebted state-owned companies. In aggregate, they are unlikely to have a major impact on China’s debt levels, given funding constraints and banks’ limited capacity to change corporate governance.

Posted August 1, 2017
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