Zombie Economy in China: A research on Chinese firms’ financial statements.

Abstract

With China’s economy growing at its slowest pace in 26 years, Chinese government has to deal with its huge, inefficient and indebted state-owned companies in order to reduce industrial overcapacity and make broader effort to restructure the economy. As much as the 13% of the Chinese listed companies are considered to be “zombie enterprises”: companies that continue to operate even though they are insolvent or near bankruptcy. This phenomenon has its roots in the misallocation of resources and capital, issue that is becoming crucial in post-industrial China. This has the consequence of distorting competition, as privately held firms do not have access to such sources of debt and cannot keep pace with their competitors’ low prices. My dissertation project is divided in two big section: the aim of the first one is to give an overview on the Chinese economy, analysing the China debt and the transition towards privatisation and a more market driven economy, in addition to a focus on the “zombie enterprises” phenomenon along with their distribution across regions, ownership and sectors. The second section focuses on the analysis and interpretation of Chinese zombie SOEs’ financial statement in order to underline possible trends and government interventions in the enterprises’ governance.