(Yicai Global) July 30 -- China encourages indebted state-owned firms to issue preferred stocks or use the nation's bankruptcy system to phase out zombie firms.

The Development and Reform Commission released a series of policies to reduce the level of debt among state firms, including expanding the scope of pilot projects for unlisted joint-stock companies to issue preferred stocks, the macroeconomic planning agency announced yesterday. Preferred shares usually pay out fixed dividends while enjoying priority over the issuer's income.

The NDRC will also establish a debt risk monitoring system to regularly supervise different sectors' and regions' performance.

This year, Chinese firms have penned new debt-to-equity swap deals worth about CNY390 billion (USD56.3 billion). Chinese companies have inked CNY2.4 trillion (USD348.5 billion) worth of such contracts since 2016.

Last year, the leverage ratio of China's real economy, including households and regional governments, was 243.7 percent. State companies and regional administrations made up 60 percent of the total debt of the real economy as the debt-to-equity ratio among state firms was 103 percent. All corporations had a ratio of 153.6 percent.

Editor: Emmi Laine