BEIJING - China's State Council on Monday released a guideline on the long-discussed debt-for-equity swaps, pledging to "orderly" conduct the scheme 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.

Poor-performing "zombie enterprises" and those with bad credit records will not participate, according to the State Council.

The plan prevents banks from directly swapping non-performing loans, with conversions to be handled by asset management institutions and state investment firms.

This kind of swap is generally believed to benefit both banks and struggling companies. They reduce the pressure on companies and free up bank balance sheets, releasing capital for investment.