Chinese zombie companies have been lurking in the news recently, but a reference from last month remains the most tantalizing.
An article published in The Beijing News on May 17 reported that seven coal mining firms in Shanxi have managed to rack up 1.1 trillion yuan (US$169 billion) in debt between them. That is about a third of China’s total forex reserves.
The article was pulled, no doubt due to the sensitive implications in terms of the workers if the companies fail.
The government has said it estimates that in tackling industry oversupply, the mining sector will lose up to 1.3 million jobs. An employee at Jinneng Group (one of the ‘Magnificent Seven’) was told the company could continue to pay wages “as long as the government provides subsidies.”
Last year, SOEs received 1.6 billion yuan in subsidies from the government, one billion yuan more than in 2014. The zombies of northern China seem likely to be on the march for some time to come.