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1.Market Observations, 8.Was Sticky

22 Nov 2016 (AFR) – How to kill off China’s zombie companies

(22 November 2016, AFR, p10, by Fan He)

‘As Warren Buffett said, when the tide goes out, you can see who’s been swimming naked. So it is that as China’s growth slows, an army of zombie enterprises has emerged. These zombie companies are heavily indebted, kept afloat only by continuous support from government and banks. The government does not want to see zombie companies wiped out because it worries about the messy results: rampant unemployment and a significant loss of tax revenue. The banks are willing to lend a hand because they do not want to see their earnings fall when forced to make bad debt provisions.’

Read more at AFR.com (might need AFR login access, or try: AFR.com/trial)

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