Beijing to go after 'zombie companies' in reform push

Beijing to go after 'zombie companies' in reform push
China's Premier Li Keqiang
PHOTO: Reuters

SHANGHAI - The Chinese government is preparing to go zombie hunting. Keen to improve the health of the economy, Beijing has set its sights on serious structural reform. This includes rooting out companies that, although chronically unprofitable, refuse to die.

Premier Li Keqiang has made the government's stance clear. "Get rid of zombie companies completely," he told an executive meeting of the State Council, China's cabinet, on Dec. 9.

Li defined a zombie company as a one that has been in the red for three years in a row. He said the government will see that such companies are disposed of through acquisitions by industry peers, bankruptcy or other methods.

The move comes at a time when the government is preparing to launch its next five-year plan in 2016.

The administration of President Xi Jinping is considering lowering the annual economic growth target in the upcoming plan to the upper 6 per cent level on average, down slightly from the current target of 7 per cent.

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