Research on Zombie Enterprise

Abstract

With the decreasing marginal effect of macro-policy, the structural problems accumulated in the process of rapid development of China's economy since the reform and opening-up 40-odd years ago have begun to emerge, such as high debt, overcapacity of enterprises, declining return on investment, operational difficulties and even continuous losses. These "blood-sucking zombie enterprises" are gradually exposed to the public's eyes. These zombie enterprises have adverse effects on the future development of China, such as wasting social resources, disturbing market order, disengagement from asset supervision, harming workers' rights and interests, and forming financial risks. Based on logic analysis, this article analyzes the formation of zombie enterprises, the necessity of dealing with zombie enterprises and the solutions. The result shows that Zombie companies lead to misallocation of resources, occupying social capital, making it difficult for emerging companies to obtain funds, and hindering innovation and development. Bankruptcy disposal of zombie companies must pass strict legislation, law enforcement and legal supervision to effectively solve financial risks and protect the rights and interests of employees.