[Beijing has stepped up its battle against bad debt in China’s banking system, with a state-led loans-for-bonds scheme surging in value by about $100bn in the past two months alone.
The government-led programme, where banks trade short-term loans to local government companies in exchange for bonds with longer maturities, soared in value to hit more than $220bn by the end of April, up from about $120bn at the start of March, according to data from Wind Information.
Up to Rmb1tn ($152bn) has also been approved for a debt-to-equity swap, which forces banks to write off bad debt in exchange for equity in ailing companies, according to Caixin, a respected business news website.
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