China's top state asset regulator issued a guideline on Friday on strengthening debt risk control of local state-owned enterprises (SOEs) to effectively prevent and defuse major risks.
Local state asset regulators should promptly establish or improve monitoring and early warning mechanisms to accurately identify debt risks of local SOEs, said the guideline released by the State-owned Assets Supervision and Administration Commission.
Emphasis should be laid on the supervision of local SOEs with prominent debt risks and special regulatory measures should be adopted, while the size of debt and the asset-liability ratio of highly indebted firms should be constrained.
The guideline also urged local state asset regulators to prioritize the prevention of bond defaults by local SOEs, strictly prohibiting them from escaping their debt obligations.
It also required local state asset regulators to ramp up control over the firms' use of debt financing funds and improve their anti-risk capability by deepening reforms.