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China Said to Plan $155 Billion of Sour Loan-Equity Swaps

  • Swaps may lift banks' net profits by 4% a year, Huatai says
  • Banks' soured credit at highest in a decade as growth slows
A man launches a kite in the shape of the Chinese national flag on the Bund in Shanghai. China’s policymakers are seeking ways to clean up mounting bad loans at the nation’s banks, which are at their highest levels in a decade amid slowing economic growth and government moves to curb overcapacity in manufacturing.

A man launches a kite in the shape of the Chinese national flag on the Bund in Shanghai. China’s policymakers are seeking ways to clean up mounting bad loans at the nation’s banks, which are at their highest levels in a decade amid slowing economic growth and government moves to curb overcapacity in manufacturing.

Photographer: Qilai Shen/Bloomberg
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China may approve as soon as this month a plan to make it easier for banks to convert soured debt into equity, according to a person with knowledge of the matter.

The government may allow conversions of as much as 1 trillion yuan ($155 billion) of bad loans under the plan, said the person, who asked not to be named because the information isn’t public yet. Caixin magazine reported on the potential size of the conversions over the weekend.