Exit fund for enterprises can help ease bad debt issue

China should consider setting up a 100 billion yuan ($15 billion) enterprise exit fund to ensure better management of its over 6 trillion yuan of non-performing assets, said Li Daokui, an economist at Tsinghua University and a former Chinese central bank monetary policy committee member.

Li, who is also a top political advisor, said the fund could be used for employee resettlement, salaries and welfare and would encourage local governments to dismantle inefficient firms.

Though the nation has gained immense experience from its 40 years of reform and opening-up by encouraging new players, it has always faced challenges due to the presence of a large number of inefficient firms.