Zombie Companies Don't Die, They Just Fade Away

Eight industries are being targeted under the "zombie company" reform plan, including steel and cement. The plan is for the overcapacity to fade away...

The government will use various methods, including the market, forced mergers and environmental regulations. The latter is probably all the government needs to shut 100% of excess production, if it would enforce its own regulations.

In the December 22 meeting of the National Development and Reform Work Conference, the National Development and Reform Commission director, said Xu Shaoshi, should actively and steadily disposal "zombie companies" to resolve the overcapacity as "a bid." Next year the NDRC will promote the development of the implementation of industrial restructuring and disposal of "zombie companies" program, the main use of market mechanisms, economic instruments, legal way, through strict environmental protection, energy, technical standards, Forced to withdraw excess capacity.

SASAC Deputy Director Zhang Xiwu in the 11th State Council Information Office held a policy of routine briefing that the next two years will optimize the allocation of resources by accelerating, the central enterprises to promote the group level and industry sector mergers and acquisitions, reduce duplication of investment. Phasing out inefficient areas that do not meet national energy consumption, environmental protection, quality, safety and other standards and long-term loss of overcapacity industries and enterprises, the implementation of Guantingbingzhuan or peeling restructuring measures to promote quality and efficiency of central enterprises.

...He pointed out that the capacity to bear the brunt of the eight sectors, namely steel, coal , cement, glass, petroleum, petrochemical, iron ore , non-ferrous metals. As of early December 2015, a few large industries producer price index (PPI) has been more than 40 consecutive months of negative growth state, which several major industries of the entire industry's contribution to the PPI fell 70% -80%, a loss of up to 80% Lee as thin as paper, state-owned enterprises in these sectors "to production capacity," the task is heavy, a lot of "zombie companies" will exit the market.

"Supply-side reform is to implement a breakthrough for repaying the 'zombie' companies, time is tight and heavy task, you must take the initiative." Kum pointed out to capacity, lay off "zombie companies" can be summarized into five paths: one from solving "zombie companies" to start, Guantingbingzhuan, with the transfer of property, closure and bankruptcy of ways to speed up cleanup exit; the second is stripped out, restructuring and merger and re-allocation of resources; third is to use "the cage for a bird," the idea enchant product, for technology, renewal of the way they operate, to provide an effective supply; Fourth, to expand exports, open up new markets, from the demand side to speed up production capacity; Five is to accelerate production output, the supply-side capacity to digest. Through mergers and acquisitions, can effectively alleviate the pains to capacity, while reshaping the vitality of enterprises.


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