## Resolving China's Zombies: Tackling Debt and Raising Productivity

_IMF Working Papers, November 27, 2017_

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## Bibliographic details
- Authors: Waikei R Lam, Alfred Schipke, Yuyan Tan, Zhibo Tan
- Published: November 27, 2017
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484330722.001

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### Summary and central findings
- Nonviable “zombie” firms are a key concern in China and have strong linkages with state-owned enterprises (SOEs).
- Zombie firms and SOEs, as a group, account for an outsized share of corporate debt, contribute to much of the rise in debt, and face weak fundamentals.
- Empirical results indicate resolving these weak firms can generate significant gains of 0.7–1.2 percentage points in long-term growth per year.
- The paper uses novel firm-level industrial survey data to document these relationships and quantify effects.

### Quantitative impacts and key statistics
- Potential long-term growth gain from resolving weak firms: 0.7–1.2 percentage points per year.
- Publication specifics:
  - Pages: 26
  - Volume: 2017
  - Issue: 266
  - Series: Working Paper No. 2017/266
  - DOI: https://doi.org/10.5089/9781484330722.001
  - Stock No: WPIEA2017266
  - ISBN: 9781484330722
  - ISSN: 1018-5941

### Role of SOEs and debt vulnerabilities
- Zombies have strong linkages with state-owned enterprises (SOEs), amplifying debt vulnerabilities.
- As a group, zombie firms and SOEs:
  - Account for an outsized share of corporate debt.
  - Contribute to much of the rise in corporate debt.
  - Exhibit weak fundamentals that underpin fragility in the corporate sector.

### Restructuring options evaluated and their effects
- The paper evaluates effects of different restructuring options and finds significant benefits from:
  - Deleveraging.
  - Reducing government subsidies.
  - Operational restructuring through divestment.
  - Operational restructuring by reducing redundancy.
- These measures have significant benefits in restoring corporate performance for zombie firms.

### Subjects and keywords (as listed)
- Subjects: Asset and liability management; Asset management; Debt burden; Economic sectors; External debt; Production; Productivity; Public enterprises; Total factor productivity.
- Keywords: Asset management; capital frowth; China; company; corporate debt; Debt burden; debt restructuring; firm identification code; government; liability-to-asset ratio; nonviable company; overcapacity firm; Productivity; public enterprise; Public enterprises; revenue data; state-owned enterprises; steel firm; Total factor productivity; WP; zombie firm; zombie firms.

*IMF Working Paper: Waikei Raphael Lam, Alfred Schipke, Yuyan Tan, and Zhibo Tan. "Resolving China's Zombies: Tackling Debt and Raising Productivity", November 27, 2017.*

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_Source: https://www.imf.org/en/publications/wp/issues/2017/11/27/resolving-china-zombies-tackling-debt-and-raising-productivity-45432_