MNI POLICY: PBOC Chen: Cut Leverage of SOEs and Local Govts

     BEIJING (MNI) - Leverage ratios of state-owned companies and local

governments should be reduced further and increased paring back of debt levels

is not incompatible with economic stability, People's Bank of China Deputy

Governor Chen Yulu said Tuesday.

     Although the aims of deleveraging have basically been achieved, further

cuts were needed to reduce leverage ratios further, said Chen, who is also

deputy head of the economic committee of Chinese People's Political Consultative

Conference

     "Structural deleveraging and stabilizing economic growth have many aspects

that allow them to coordinate, they are not against each other," Chen told a

press conference in Beijing.

     Pushing deleveraging through requires a stable macro and fiscal back drop,

with counter-cyclical adjustments of fiscal and monetary policy needed, Chen

said, adding the PBOC's five RRR cuts since the start of 2018 was in line with

the goal.

     He stressed that China should stick with removing zombie companies from the

market to release resources for more efficient sectors and companies.

     He praised the role of debt-to-equity swaps as helping companies reduce

leverage ratios and improve management.

     "We need to establish a multi-layered capital market that is standardized,

transparent, open, energetic and resilient, and strengthening support of equity

financing to the real economy is key to maintain stability of macro-leverage,"

he said.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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