Implode-o-Meter News - China zombie factories kept open to give illusion of prosperity

"There are large numbers of companies across China that should go bankrupt but haven't done so," says Han Chuanhua, a bankruptcy lawyer at Zhongzi Law Office, a Beijing legal practice. "The government doesn't want to see bankruptcy because as soon as companies go bust, unemployment spikes and tax revenues disappear. By stopping companies from going bankrupt, officials are able to maintain the illusion of local prosperity, economic growth and stable taxes."
The outstanding volume of non-performing loans in the Chinese banking sector has increased 50 per cent since the beginning of 2013, according to estimates from ANZ, the Australian bank, but the sector-wide NPL ratio remains extremely low, at just over 1.2 per cent. In private, however, senior Chinese financial officials admit the real ratio is almost certainly much higher, obscured by local governments trying to prop up companies.

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China zombie factories kept open to give illusion of prosperity