Lossmaking “zombie” companies comprise a smaller share of China’s overall corporate debt than widely assumed, according to new International Monetary Fund research highlighting the broad challenge facing policymakers as they seek to control rising debt.
The IMF warned in August of China’s “dangerous” pace of overall debt growth, with corporate debt the biggest contributor. President Xi Jinping has made controlling debt at state-owned enterprises a top policy priority, and financial regulators recently issued the toughest rules to date aimed at curbing shadow banking.
Economists have long identified state-owned “zombie enterprises” — lossmaking groups kept afloat with cheap credit and state subsidies — as a big source of China’s debt problem.
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