Zombie firms and over-capacity in Chinese manufacturing

Guangjun Shen and Binkai Chen

China Economic Review, 2017, vol. 44, issue C, 327-342

Abstract: The problems of over-capacity and zombie firms in China's manufacturing attract all aspects of attention, but academic analysis is still absent. Using firm-level data of Chinese manufacturing, this study first documents the problems of over-capacity and zombie firms during 2011–2013. We find that the over-capacity problem is much more severe in the northeastern and western regions of China, in heavy chemical industries, and in state-owned sector. The distribution of zombie firms is in a similar manner across region, industry and ownership. We also empirically test the relationship between zombie firms and over-capacity, finding that zombie firms cause and worsen over-capacity by crowding out healthy firms.

Keywords: Over-capacity; Capacity utilization; Zombie firm; Crowd out; China (search for similar items in EconPapers)
JEL-codes: D24 L60 O12 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (63)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:44:y:2017:i:c:p:327-342

DOI: 10.1016/j.chieco.2017.05.008

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