* Welcomes foreign investment firms, funds, official says
* Rising corporate debt could destabilise economy - analysts
* Debt-to-equity swaps seen in cyclical industries in early
BEIJING, Oct 14 China will welcome the
participation of foreign investment firms and funds in its debt
reduction efforts, an official of the country's powerful state
planner said on Friday.
China unveiled guidelines this week to cut rising levels of
corporate debt that some analysts fear could destabilise the
world's second-largest economy. Converting debt into equity
stakes will be among the measures to cut leverage.
"We welcome international investment companies and
investment funds to participate in the (debt) disposal process,"
Sun Xuegong, deputy director general of the department of fiscal
and financial affairs at the National Development and Reform
Commission, said at a briefing in Beijing.
In the initial stages, Sun said, debt-to-equity swaps could
mostly happen in China's "cyclical" industries, where companies
face greater operating difficulties.
Such sectors include steel and coal, for example, but Sun
did not elaborate.
The government will step up scrutiny to keep "zombie firms"
out of the swaps programme, he added.
Zombie firms are economically unviable enterprises that
survive only with the support of local governments and banks.
China has vowed to use tougher environmental, efficiency,
quality and safety standards to drive them out of the market.
On Thursday, an agency spokesman said the latest round of
debt-to-equity swaps could cut total company liabilities by
around 10 to 20 percentage points, but the final amount would be
decided by the market, and not the government.
The guidelines require Chinese banks to transfer debt to
asset management companies, which in turn "implement"
debt-to-equity swaps, because commercial bank law bars banks
from investing in non-financial firms.
(Reporting by Kevin Yao and Beijing Monitoring Desk; Editing by
Shri Navaratnam and Clarence Fernandez)