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Resolving China's Zombies: Tackling Debt and Raising Productivity, Waikei Lam, Alfred Schipke, Yuyan Tan, Zhibo Tan

Abstract
Nonviable “zombie” firms have become a key concern in China. Using novel firm-level industrial survey data, this paper illustrates the central role of zombies and their strong linkages with stateowned enterprises (SOEs) in contributing to debt vulnerabilities and low productivity. As a group, zombie firms and SOEs account for an outsized share of corporate debt, contribute to much of the rise in debt, and face weak fundamentals. Empirical results also show that resolving these weak firms can generate significant gains of 0.7–1.2 percentage points in long-term growth per year. These results also shed light on the ongoing government strategy to tackle these issues by evaluating the effects of different restructuring options. In particular, deleveraging, reducing government subsidies, as well as operational restructuring through divestment and reducing redundancy have significant benefits in restoring corporate performance for zombie firms
Table Of Contents
Cover -- Resolving China's Zombies: Tackling Debt and Raising Productivity -- I. INTRODUCTION -- II. BACKGROUND: CORPORATE DEBT VULNERABILITIES AND MISALLOCATION OF RESOURCES -- III. WHY DO ZOMBIE FIRMS MATTER IN RESOURCE MISALLOCATION? -- IV. EMPIRICAL ANALYSIS -- V. PRODUCTIVITY GAINS FROM RESOLVING RESOURCE MISALLOCATION -- VI. GOVERNMENT MEASURES IN RESOLVING WEAK FIRMS -- VII. POLICY IMPLICATIONS -- VIII. CONCLUSIONS
Language
eng
Literary Form
non fiction
Physical Description
1 online resource (27 pages)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781484331972

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