I. Introduction

In p>1999, the Chinese government carried out the reform of "debt-to-equity swap" of state-owned enterprises, and at the same time established four asset management companies to manage the state-owned capital formed by "debt-to-equity swap". This is another innovative move on the long road of state-owned enterprise reform. The acquisition, management and disposal of non-performing assets of state-owned commercial banks by means of financial asset management companies is an important decision for China to deepen financial reform, prevent and resolve financial risks and promote the reform and development of state-owned enterprises. At the same time, debt-to-equity swap is by far the largest state-owned enterprise in China. The most influential debt restructuring action.

In some recent reports about debt-to-equity swaps, it can be clearly seen that state-owned asset management companies frequently make heavy punches and begin to use foreign capital to resolve non-performing financial assets. Debt-to-equity swap is also a hot topic in the international capital market. Germany and France are actively discussing the use of debt-to-equity swap to resolve Russia's international debt disputes, and some countries in Southeast Asia are also actively using foreign capital to resolve their bad financial assets. These measures have achieved good results. At present, China's operation mode is to exchange assets with foreign capital in the form of joint venture or cooperation, which is relatively simple and safe, and more operation modes are under consideration. However, there are still differences in the financial circles on this issue, and more concerns come from the nature of the national creditor's rights of China's non-performing assets and the immaturity of China's secondary market, which inevitably make people worry when choosing the handling methods.

However, in view of the strong impetus of foreign capital to China's economy in the past 2 years and the catalytic effect on China's deepening reform, it is obviously necessary to introduce foreign capital on the issue of non-performing assets. This paper intends to express my views on this issue.

second, the advantages of using foreign capital to resolve non-performing assets

can first be understood as the advantages in the amount of funds. It is reported that there are 2 trillion yuan of non-performing assets deposited from the four major state-owned banks. At present, China has at least 1 trillion yuan of financial assets that need to be reorganized or disposed of, and the four major asset management companies each have only 1 billion yuan of registered capital. Moreover, the comprehensive management of the ecological environment and the construction of infrastructure such as transportation and energy all need a lot of money. In addition, China has implemented a proactive fiscal policy in recent years, and its finances are already stretched. The government has been unable to support state-owned enterprises to extricate themselves from difficulties, and the government should not interfere with the operation of enterprises under the conditions of market economy. In this situation, asset management companies are required to open up more avenues in the use of funds and use foreign capital to speed up the disposal of non-performing assets. In order to meet the needs of development strategy, the country has established many enterprises with high capital intensity and large capital demand, which is inconsistent with the comparative advantage determined by China's factor endowment. By using joint ventures or listing on foreign capital markets, the market competitiveness of enterprises can be improved by directly utilizing foreign cheaper funds and avoiding the factor endowment restriction of scarce domestic capital.

At the same time of introducing foreign capital, advanced foreign technology and management methods will also be introduced into China, which can accelerate the process of restructuring and disposal of non-performing assets. China Xinda Asset Management Company's use of foreign capital to revitalize the non-performing assets of Bengbu Thermal Power Plant is a successful case of China's financial asset management company's use of foreign capital to dispose of non-performing financial assets. Bengbu Thermal Power Plant is the largest regional cogeneration enterprise in Anhui Province. Due to the serious shortage of its own funds, heavy debts and poor management, the enterprise has serious difficulties in operation. After receiving the creditor's rights of 172.94 million yuan from China Construction Bank in September 1999, China Xinda Asset Management Company made a plan to introduce foreign strategic investors to dispose of non-performing assets on the basis of repeated investigations and in-depth analysis, and signed a package agreement with foreign parties in March 2, including Sino-foreign joint venture, cooperative operation, capital reorganization and asset reorganization. The introduction of overseas strategic investors has brought advanced management experience to enterprises, promoted the transformation of operating mechanism and added vitality to the development of enterprises; Giving full play to the advantages of asset management companies' investment banking means will help to maximize the recovery rate of non-performing assets and resolve financial risks. At present, the Bengbu thermal power plant project has achieved remarkable results, and the cooperative company Xinyuan Thermal Power has been operating well since its establishment, turning losses into profits in one fell swoop. Cinda's creditor's rights have also been well disposed of. By April this year, Cinda had recovered the principal and interest of creditor's rights of 85.12 million yuan. The retained creditor's rights undertaken by the cooperative company have been transformed into high-quality creditor's rights because the enterprise is in good operating condition, the loan receives interest normally and the assets of the enterprise are used as collateral. The successful operation of the Bengbu thermal power plant project fully shows that introducing foreign capital is an effective way to raise funds to dispose of non-performing assets, enhance strength, and more importantly, to promote enterprises to change their operating mechanisms, organize production, operation and management according to international practices, and support the restructuring of state-owned enterprises to get rid of difficulties.

In addition, it is also a very beneficial innovation for China Cinda Asset Management Company and Duxiu Star Asia Pacific Investment Co., Ltd., a subsidiary of Duxiu Star Investment Fund, to establish a Sino-foreign joint venture to dispose of non-performing assets. According to the cooperation agreement, the foreign party will invest in cash and Cinda Company with non-cash assets to form a joint venture company to dispose of the non-performing financial assets owned by Cinda Company. This form of cooperation is the first time among asset management companies in China. According to industry insiders, it is a widely used method in the world to dispose of non-performing assets in batches through joint ventures. Especially since the Asian financial crisis, some countries have achieved good results in disposing of non-performing assets of banks in this way. The cooperation between China Cinda Asset Management Company and Duxiu Star Asia-Pacific Investment Company will be the first beneficial attempt for China Asset Management Company and overseas financial industry to dispose of non-performing financial assets by establishing a joint venture company. This is not only conducive to using foreign capital to improve the efficiency of non-performing assets disposal, but more importantly, we can learn from foreign experience and explore effective ways to dispose of non-performing financial assets that are suitable for China's national conditions.

Moreover, China does not have comparative advantages in high-tech industrial sectors such as information industry and biological industry. However, many administrative officials also need political achievements or a national strategy. Introduce some high-tech industries into state-owned enterprises that have serious problems themselves. Therefore, it is often seen that the newly introduced production line of a certain pharmaceutical factory has been put on hold, and the biopharmaceutical factory developed by a certain winery has been used as a warehouse. This kind of high-tech production line not only can't make profits for enterprises, but also increases the burden on enterprises. These administrative interventions have caused improper allocation of resources and idle equipment in enterprises, which has caused great waste of national resources. At this point, foreign capital just makes up for this disadvantage. Foreign capital engaged in specialized production fields has strong advantages in technology, management experience and information resources in the operation of certain industries, so that the resources of enterprises can be allocated reasonably and effectively, and the competitiveness of enterprises can be enhanced.

in any case, for asset management companies, opening up to foreign capital is an effective and realistic choice, and it is also the general trend. At the same time, foreign investors also have a strong interest in China's bad financial assets. In their eyes, it is a good thing to enter the China market by merging financial assets, take advantage of China's natural resources and existing marketing network, enjoy the advantages of China's low labor costs and management expenses, and expand the production scale. Now, there are a lot of funds in the international capital market, and they are all making medium and long-term investments, so they are very confident in the reorganization and listing of Chinese enterprises. At the same time, it is also very beneficial to China's state-owned economy. The state-owned enterprises are going from bad to worse, and the state-owned assets are not well managed. In addition, the scale of the state-owned economy is too large, but the quality is not high, which is not conducive to ensuring that the state-owned economy controls important industries and key areas that are related to the lifeline of the national economy. The entry of foreign capital is conducive to improving the quality of state-owned assets, and to maintaining and increasing the value of state-owned assets. Moreover, the withdrawal of state-owned assets can bring a considerable amount of funds, which is conducive to the establishment of a social security system. Therefore, it can be said that this is a multi-party win-win scheme.

III. Analysis of Difficulties and Some Problems

Although it has great benefits in utilizing foreign capital to promote debt-to-equity swap, the disposal of non-performing assets has far-reaching significance in preventing financial risks, ensuring economic stability and promoting the reform of state-owned enterprises, and the specific operation must be cautious. In addition, it is not easy to let so many state-owned capital withdraw from the production field and transfer it to foreign capital at once. There are bound to be many obstacles and problems. I will analyze and study the main difficulties and problems below:

1. The problems of non-performing financial assets themselves. The word "non-performing" itself shows that the disposal of these assets will not be smooth sailing. Under normal circumstances, there are two ways for an enterprise to obtain the funds needed for operation: equity or debt. In the long run, the dividend paid by enterprises to equity owners should be higher than the interest on debts, that is, there is a risk premium in the average return paid to equity funds. Therefore, if state-owned enterprises are unable to repay the bank interest and principal, it can only show that the enterprise itself has poor benefits and low return on assets. Economists believe that there is no essential difference between the capital movement between countries and the capital flow between different regions (or different industries) in a country. Because capital always moves from an old place to a new investment place corresponding to a higher expected rate of return, economic individuals pursue its maximization. Therefore, the purpose of foreign capital coming to China is not to help China's economic development. Moreover, a considerable number of banks' non-performing assets have little value, and some of them can't even sort out the basic debt relationship for various reasons, which has brought great trouble to the utilization of foreign capital. Some foreign businessmen have expressed their fear of encountering some black holes in investing in these non-performing assets: enterprises produce a large number of products that are not suitable for market demand, serious inventory, heavy social burden, chaotic financial situation and so on.

2. The question of rights and interests. I remember that when the news of debt-to-equity swap just came out, some enterprises bombarded the State Economic and Trade Commission, hoping to be selected. With the news that asset management companies can exercise shareholders' rights after debt-to-equity swap, some enterprises that have been lucky enough to be included in the debt-to-equity swap list quietly want to quit the debt-to-equity swap reform. The original idea of the enterprise was nothing more than thinking that debt-to-equity swap was a "free lunch" and a smooth escape of debt was completed after a digital game. In fact, debt-to-equity swap is a bitter medicine, especially when transferring foreign capital. What followed was the surrender of management rights, and the practice of utilizing foreign capital in the past made us feel the strong desire of foreign investors to hold shares, which would inevitably involve strong obstruction within the enterprise. There are also those enterprises' former superior departments or local governments, where non-performing assets are transferred to foreign capital, and state-owned enterprises are restructured and reorganized into new joint ventures, which means that the administrative power of the departments is weakened. In addition, after the withdrawal of state-owned assets, whether the funds are owned by the central government, a department (or local government) or an enterprise involves the interests of the central government, departments (or local governments) and enterprises, which affects the enthusiasm of all parties.

3. Problems of system and regulations. At present, China has not formulated special laws and regulations specifically for state-owned asset management companies, and the operation of state-owned asset management companies is very irregular, and some operating methods of state-owned asset management companies even contradict the existing laws. For example, Article 61 of the Guarantee Law stipulates: "The creditor's rights of the main contract mortgaged at the maximum amount shall not be transferred." However, the creditor's rights with maximum mortgage are widely used in banks, and the amount is also large, which limits the transfer of such creditor's rights from banks to asset management companies. In fact, a large number of main contract claims with maximum mortgage have been stripped from banks to asset management companies, which is illegal and invalid according to the current laws. For another example, as a financial enterprise, asset management companies should be regulated by the Company Law. Article 24 of "Company Law" stipulates that "shareholders can make capital contribution in currency", but it is not clear that they can make capital contribution in the form of creditor's rights. Article 12 stipulates that "if a company invests in other companies, its accumulated investment shall not exceed 5% of its net assets". Taking Cinda Assets Company as an example, its registered capital is about 1 billion yuan, but the company that has formally signed a contract with it has invested more than 5 billion yuan, which obviously does not conform to the provisions of the Company Law. In addition, according to the relevant provisions of the state, all taxes and fees in the process of acquisition, undertaking and disposal of non-performing assets by financial asset companies should be exempted. But whether to adopt direct exemption or first levy and then return? The specific operation is not clear. In addition, according to Articles 44 and 45 of the Law of the State-owned Industrial Enterprises, the appointment and removal of directors and other senior managers of state-owned enterprises must be approved by the competent government departments. However, after the debt-to-equity swap, according to the provisions of the Company Law, the asset company will join as a shareholder and can exercise the right to elect and change personnel. If there is a "collision" with the competent department of state-owned enterprises in the appointment and dismissal of personnel, which "mother-in-law" should the enterprise listen to? At present, asset management companies are subject to at least five existing laws and regulations, namely, Commercial Bank Law, Company Law, Guarantee Law, State-owned Industrial Enterprises Law and Tax Law, which leave many hidden dangers for asset management companies to dispose of non-performing assets. This legal system brings a lot of uncertainty, which increases the risk of foreign investment. Foreign investors are not clear about their rights and obligations, can not be clearly guaranteed by law, do not know how much power they have to dispose of these non-performing assets, and are worried about the legitimacy and safety of undertaking non-performing assets, which will directly affect the attractiveness of non-performing assets to foreign investment.

4. In addition, with the deepening of reform and the development of capital market, many new problems will appear. There is an economic security problem in choosing the way to transfer foreign capital. From the current case, the recent operation mode is only a simple asset replacement in the form of joint venture or cooperation, which will certainly not affect economic security. However, with the deepening of equity transfer and the need to further accelerate the disposal of non-performing assets, more ways of attracting foreign investment will be formed, and more consideration will be given to the capital market. Such as issuing bonds or convertible bonds, although this method is simple to operate, and can raise a lot of funds in a short period of time. However, if the equity held by the asset management company can't get rid of the fate of "inferior quality" by then, the bondholders will pay their bonds to the enterprises and asset management companies at full face value, and the enterprises and asset management companies will fall into an international debt crisis. Another example is whether the use of the securities market to attract foreign investment will impact China's securities market system.

IV. Countermeasures Analysis

Of course, there are still many problems that have not appeared or been revealed, which have hindered the deepening of debt-to-equity swap and are not conducive to the introduction of foreign capital. Below I want to make a simple analysis of the countermeasures to these problems, hoping to help.

On the issue of non-performing assets, asset management companies need to think about how to make "non-performing" assets more "selling points" before selling these projects to foreign investors. If there is a coal mining enterprise with a debt of 154 million yuan, it has been transformed into a "local leading enterprise with huge market potential, leading technology in the whole country and a stable market", etc. Of course, asset management companies should make great efforts in real places after making good articles in imaginary places, and asset management companies should introduce some preferential conditions they care about to those foreign investors. Generally, for example, non-performing assets disposed by asset management companies can enjoy partial or full tax relief; Relevant government departments will soon introduce relevant policies to attract foreign investment, which will be purchased by foreign financial institutions and non-financial institutions.