The National Development and Reform Commission and ten other departments have co-released a document that proposes to accelerate the disposal of the debt of “zombie enterprises” and de-capacity companies, National Business Daily reported.
The document urges local governments to remove zombie enterprises debt by means of bankruptcy liquidation, bankruptcy reorganization, debt restructuring, mergers and reorganization.
It also bans local government from offering financial subsidies to sustain zombie enterprises.
Some zombie enterprises temporarily survive because they are propped up by the cyclical rise in prices of production materials such as steel, coal, and cement, said Li Jin, chief researcher at the Enterprise Research Institute.
But Li emphasized that it is necessary to see that such companies do not have long-term viability and local governments should be determined to remove them.