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Shut down zombie firms, compensate staff

By Wang Zeying | China Daily | Updated: 2016-02-04 07:46

Zombie companies, referring to those that need constant bailouts in order to operate or indebted ones, owe their existence for a variety of reasons. Some met their sorry fate after being stripped of their performing assets, while others did so because the central and provincial governments left them to rot after they fulfilled the temporary purposes for which they were established. Still others are paying the price for not fully implementing reform and meeting market demands.

Although zombie companies can temporarily reduce unemployment pressure, market rules demand them be given a decent burial because they are not only inefficient but also consume huge amounts of resources. Besides, the eradication of zombie companies will help the transformation and upgrading of the economic structure, which, in turn, will facilitate high-quality employment growth and social stability in the long run.

Phasing out zombie companies is mandatory in the process of reform; it will also prudently solve the problem of overcapacity and promote supply-side reform. The recent executive meeting of the State Council, China's Cabinet, advocated eradicating zombie companies to help State-owned enterprises perform more efficiently. But in the process of eradicating the zombie companies, the most important task is to properly deal with their employees.

Shut down zombie firms, compensate staff

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