An employee counts yuan banknotes at a bank in Huaibei, Anhui province June 22, 2010.[Photo/Agencies]

The State Council has agreed to establish an inter-ministerial joint meeting system to reduce enterprise leverage, and experts predict the equipment manufacturing industry might be the top priority in the debt-for-equity swap pilot, the National Business Daily reported.

Led by the National Development and Reform Commission (NDRC), the joint meeting will consist of 17 ministries and commissions, including the Ministry of Finance, People's Bank of China, China Banking Regulatory Commission and the State-owned Assets Supervision and Administration Commission.

The joint meeting will be responsible for developing related documents for reducing corporate leverage and organizing debt-to-equity swap pilots. Xu Shaoshi, head of NDRC, will serve as the convener.

The State Council released a guideline early this month on the long-discussed debt-for-equity swap, pledging to "orderly" conduct the program as the country steps up efforts to tackle high corporate debt.

Companies in "temporary difficulties" but with "long-term potential" will be able to exchange their debt for stocks, according to the guideline. However, poor-performing "zombie enterprises", and those with bad credit records, will not be allowed to participate.

High corporate leverage in China has been a major threat to companies' profitability and to broader financial stability. The country's total debt surged after the 2008 global financial crisis and its debt-to-GDP ratio was reportedly around 250 percent at the end of 2015.

"Debt-for-equity swap pilot is a win-win strategy," Hu Xingdou, an economics professor at Beijing Institute of Technology told the newspaper. "Banks could reduce bad loan ratio, while enterprises could make a better loan."

If the government chooses some pilots to promote the program, sectors with better assets, such as machinery manufacturing and high-tech, will be the top priority, Hu added.

Xinhua contributed to this story.