2014-07-08

PBOC Deputy Governor: Let Zombie Companies Fail

A little economic slowdown would move things along......

China should let more ailing firms fail - deputy central bank governor
"In the course of our surveys, we found that many companies are in the zombie state but they have taken up a large amount of credit," Liu Shiyu told a forum in Beijing.

He urged companies in the coal, steel, machinery and shipbuilding sectors to find ways out of business difficulties, including using a bankruptcy law introduced in 2007.

Local government officials generally mediate between creditors behind closed doors and Beijing has used the law cautiously, fearing the failure of large firms and widespread layoffs could lead to social unrest.

The number of bankruptcies handled by Chinese courts fell to 1,920 last year from 10,000 a few years ago, Liu added.

"When some large companies run into difficulties, creditors and companies are counting on the government to take the lead in administrative settlements," Liu said, warning that government-led bailouts could lead to the "misuse of resources".

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