China Kills More Zombie SOEs, Orders Total End by 2020
Zhang Yushuo
/SOURCE : yicai
China Kills More Zombie SOEs, Orders Total End by 2020

(Yicai Global) Dec. 5 -- Five Chinese state agencies jointly issued a document yesterday that directed local regulators to wrap up their disposal of zombie firms before the end of 2020. The guidelines bar local governments from donating more to the defunct state companies.

The State-Owned Assets Supervision and Administration Commission, Ministry of Finance and National Development and Reform Commission have ordered those local governments and state-owned asset agencies that have not yet listed zombies and firms at overcapacity for the purpose of disposing of their debts to come up with the first batch within three months after the new rules take effect. 

Zombie firms are China's state-owned enterprises with poor management and low profit that are below national thresholds for energy use, greenness, quality and safety. They usually rely on their parents or official largess to cling to life. The government has crafted recent policies to slay them to lower SOEs' asset-liability ratios.

Those meeting the conditions must be liquidated for insolvency. No organization, institution, firm or person may hinder or delay them or their creditors from bankruptcy filings, per the new standards, which ban localities from further funding these decrepit entities to keep them alive.

Central enterprises' debt ratios had been dropping, with the average debt ratio 66 percent, by late September, down 0.5 percent from the year before and 0.3 percent from earlier this year, per data Peng Huagang, SASAC's deputy secretary-general, announced at an Oct. 15 press briefing. 

More than 1,500 zombies have been dissolved thus far.

Editor: Ben Armour

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Keywords: Zombie Enterprise , Cut Overcapacity