The State-owned Assets Supervision and Administration Commission of the State Council website on March 26, promulgated the on strengthening the guidance of the local state-owned enterprise debt risk control work opinion ", to guide the local state-owned assets supervision and administration to further strengthen to debt risk treatment and precaution of state-owned enterprises and effectively guard against enterprise important to resolve the debt risk, firmly hold without causing regional, systemic financial risk's bottom line.

According to the guideline, local SOEs should speed up the establishment of a sound debt risk monitoring and early warning mechanism, accurately identify the debt risks of local SOEs, and include enterprises with prominent debt risks into the scope of key management and control and take special control measures. Classified management and control can be carried out with reference to the industry warning line and control line of the asset-liability ratio of central enterprises. Double constraints on the debt scale and asset-liability ratio of highly indebted enterprises can be implemented, and control targets can be determined with the principle of "one enterprise, one policy", so as to promote the asset-liability ratio of highly indebted enterprises to return to a reasonable level as soon as possible.

Recently, some local state-owned enterprises have defaulted on their bonds, causing volatility in the financial market. The guidelines make it clear that all local State-owned Assets Supervision and Investment Committees should take preventing local SOE bond defaults as the top priority in debt risk management and control, and carry out the life-cycle management of bonds. We will deal with the risk of bond default in accordance with the law, and prohibit malicious evasion or cancellation of debt.

In addition, the guideline requires local SASAC to strengthen control over the use of debt financing funds by local SOEs and ensure that the funds are invested in their main businesses. We will comprehensively deepen the reform of SOEs and effectively enhance their resilience to risks. We will exert regulatory synergy and improve the system for managing SOE debt risks.

Source: State-owned Assets and Administration Commission of the State Council