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Chinese shares advance on debt-reduction plan

BEIJING — Chinese stocks closed higher on Tuesday boosted by the government’s debt-reduction plan that will accelerate the consolidation of state-owned companies.

This photo taken on August 18, 2015 shows investors monitoring stock market movements at a brokerage house in Shanghai. Chinese shares were down more than seven percent in early trade on August 24, 2015 in the face of a global sell-off, despite Beijing authorising the state pension fund to invest in stocks in its latest attempt to shore up markets.   AFP PHOTO / JOHANNES EISELE (2016.mb.com.ph)

This photo taken on August 18, 2015 shows investors monitoring stock market movements at a brokerage house in Shanghai. Chinese shares were down more than seven percent in early trade on August 24, 2015 in the face of a global sell-off, despite Beijing authorising the state pension fund to invest in stocks in its latest attempt to shore up markets. AFP PHOTO / JOHANNES EISELE (2016.mb.com.ph)

The benchmark Shanghai Composite Index finished up 0.56 percent at 3,065.25 points. The smaller Shenzhen Component Index closed 0.38 percent higher at 10,782.31 points.

China’s State Council on Monday released guidelines on the long-discussed debt-for-equity swaps, pledging that the scheme will be conducted in an “orderly” fashion as the country steps up efforts to tackle high corporate debt.

Companies with “temporary difficulties” but “long-term potential” will be able to exchange their debt for stocks, according to the guidelines. Poorly performing “zombie enterprises” and those with bad credit records will be forbidden from participating.

The guidelines will boost investor bets in mergers and restructuring among listed state-owned companies, according to China Merchants Securities.

China’s major listed shipbuilders, including CSSC Offshore & Marine Engineering Group, China Shipbuilding, and China CSSC Holdings all surged on expectations that their state-owned parents will merge.

China United Network Communications jumped 10 percent as the company released news over the weekend that its parent company is studying plans for “mixed ownership” reforms.

The ChiNext Index, China’s NASDAQ-style enterprises, gained 0.11 percent to close at 2,210.86 points.