Senior Member

The following is from The Economist. http://www.economist.com/blogs/buttonwood/2016/01/markets

"... Nor are Chinese banks as tied into the western financial system as Lehman Brothers and Bear Stearns were; the contagion will be limited.
Of course, this state control means that non-performing loans are not recognised as quickly as they are in the west and that, as a result, struggling companies do not go out of business. These zombies hang around and make it much more difficult for competitors (including western companies) to be profitable. So the contagion effect will not be via the financial system but via corporate profits."

Then, what would be the main reason to make competitors un-profittable because of the 'zombie companies ?
  • Barque

    Senior Member
    It means that the struggling or "zombie" companies (so called because they are technically alive though practically dead) reduce the potential profits of competitors because they still manage to generate some business (even if only a little). The article implies that ideally, they should be forced to shut down.
    < Previous | Next >