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China's government looks to purge its "zombie companies"

Photo: Ralf Hirschberger/picture alliance via Getty Images

China wants to kill off — or possibly revive — its lurching horde of "zombie" companies by 2020, Caixin's Dong Jing and Leng Cheng write.

Zombie company is a term used to describe an unprofitable enterprise that would go out of business without ongoing bank loans or government support. In early 2016, the state-owned Assets Supervision and Administration Commission said there were 2,041 such companies. The central government has given local governments three months to submit a list of zombies. They have to be restructured or disposed of by 2020.

  • China has been promising to improve its bankruptcy procedure for state-owned enterprises since at least 2016. However, the going has been slow because the government wants to avoid the social instability and massive unemployment that might result from shutting down too many of these companies in too short a time frame.

By the numbers: China’s state-owned enterprises had 113.9 trillion yuan ($16.5 trillion) in total debt as of the end of October, up 7.7% for the year. That's 138% of GDP.