China Debt-for-Equity Swaps Turn Out More Like Debt-for-Debt
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A key Chinese initiative to rein in the world’s largest corporate-debt load has been a program swapping some loans into equity stakes. As the initiative gets going, however, it’s becoming clear the debt isn’t really going away.
In a late-summer notice, central government officials said that new bonds should be used to finance the swaps, effectively moving the debt off the balance sheets of the original lenders onto those buying the new debt.