Zombie companies in China in the COVID-19 era

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Zhao, J. ORCID: 0000-0001-6430-2356 and Wei, C., 2023. Zombie companies in China in the COVID-19 era. International Insolvency Review. ISSN 1180-0518 (Forthcoming)

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Abstract

COVID-19 poses novel sources of uncertainty and risk to companies, but it also offers many opportunities. In the COVID-19 era, unprecedented government and central bank interventions to tackle the economic crisis precipitated by the pandemic have reinvigorated the debate on the threat of a zombification of the economy in China, caused by unviable companies being kept alive artificially. This particular consequence of COVID-19 may aggravate the economic problem of zombie companies in China, increase the risk of further zombification and create new zombie companies. Recognising the risk factors of zombie companies and revisiting corporate insolvency law in China, this article aims to address a gap in knowledge related to how zombie companies are being handled in practice in China in the era of the pandemic. In particular, we will investigate the definition, recognition and uniqueness of zombie companies in the context of COVID-19, and propose several policy actions, primarily through Chinese insolvency law, to mitigate the risk of the return of zombie companies or a further zombification of the economy. It is anticipated that these measures will help to enhance China’s sustainable economic recovery in the wake of the COVID-19 pandemic.

Item Type:

Journal article

Publication Title:

International Insolvency Review

Creators:

Zhao, J. and Wei, C.

Publisher:

Wiley

Date:

23 July 2023

ISSN:

1180-0518