China's top economic planner said Friday that it supported non-state firms to conduct debt-to-equity swaps, the country's latest move to reduce corporate leverage.

Private firms and foreign-funded firms will be supported to conduct such swaps in a market-oriented manner, said a document released by the National Development and Reform Commission (NDRC).

Debt-to-equity swaps allow creditors to exchange debt for equity stakes so that companies with long-term potential are not forced to default.

This method has been used by state-owned enterprises.

The NDRC also allowed banks to conduct swap programs by raising money through private equity funds.

Tax preferences and low-cost funding support will be provided for companies and banks involved in such programs, according to the document.

Debt-to-equity swaps are part of China's efforts to deleverage its corporate sector and rein in financial risks.

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