Leaderette: On September 5, IQDS Scholar Cheng Hong’s article, “From the Survey: ‘Zombie Firms’ Arise from their Bad Operation”, was republished in the front page of Digest Press. The article was excerpted from the “‘zombie firms’ result from their bad operation” on August 25, in the column of “Cheng Hong’s Views on Quality” of China Business News.
In the article, Cheng argued, “zombie firms” were widely acknowledged to result from government subsidies and bank bailouts, but is it really so simple? After the survey, it was found that not all companies are able to become “zombies” and only these companies with the ability to fudge and deceive the government and banks are likely to. Just imagine, if not, Why the government or the banks will be led by the nose by a company of poor performance?
According to our estimation, “zombie companies”enjoyed average government subsidies, which are 3.57 times more than those of the other businesses, including government subsidies like technological innovation subsidies and tax rebates. These zombies also enjoyed the dividend policies and capitals favored them, but what benefits have they return to the society? The study found that in technological innovation capabilities, “non-zombie companies” invested 2.52 times more money per capita on R & D than “zombie companies”.
From this point, the “zombie firms” come into being, largely due to the bad operation of their entrepreneurs. They wasted their energy on how to fight for the external resources, without considering how to enhance their own strength by improving their endogenous capacities. With the upgrading of consumption structure in China, those enterprises lacking quality competitiveness are bound to gradually lose their market shares and thus, gradually evolve into “zombie companies” with increasingly greater operating loss.