Mark Collins – The Dragon’s Walking Dead, or…

…China’s Potemkin industries–from a major article at the NY Times:

Zombie Factories Stalk the Sputtering Chinese Economy


Miao Leijie loses money on each ton of cement his company produces. But stopping production is not an option.

When the plant opened in 2011 to supply the real estate and infrastructure industries in the northern Chinese city of Changzhi, the company raised most of the initial money from banks. Now, Mr. Miao, the factory’s general director, needs to keep churning out cement simply so the company can pay the interest on its loans.

It will be tough for the business, Lucheng Zhuoyue Cement Plant, to get out of the hole. Customers and investments are drying up, and the company is borrowing even more money to stay afloat…

Changzhi and its environs are littered with half-dead cement factories and silent, mothballed plants, an eerie backdrop to the struggling Chinese economy.

Like many industrial cities across China, Changzhi, which expanded aggressively during the country’s long investment boom, has too many factories and too little demand. That excess capacity, many economists indicate, will have to be eliminated for the Chinese economy to return to healthy growth.

But rather than shut down, Lucheng Zhuoyue and other Changzhi companies are limping along in a kind of march of the undead…

As China allows its own “zombies” to stalk the economy, the situation is clouding the country’s outlook, making it difficult to predict where growth is headed. If the leadership doesn’t address the underlying problem, the economic weakness could be prolonged.

Concerns have already been rising that China’s slowdown is worsening and its problems are becoming harder to overcome…

Some industries are plummeting, wreaking havoc in less economically diverse cities and towns. Empty apartments built during the boom are now weighing down the property sector. Businessmen in Changzhi complain that construction projects supported by the local government have also been scaled back…

The government is also planning to use state banks to finance another round of infrastructure spending aimed at aiding beleaguered industries like cement. Managers in Changzhi argue that the authorities should be doing even more to help, by setting a minimum price for cement or supporting local construction projects.

Still, such steps may do little more than keep zombie companies alive — to the detriment of the overall economy. By pumping up growth with fresh credit and stimulus, the government might temporarily revive some factories, but also exacerbate the economy’s problems of excess capacity and high debt…

And for some truly dead:

Behind Tianjin Tragedy, a Company That Flouted Regulations and Reaped Profits

More broadly:

Top Dragon Purging On/Chinese Economy’s “Oopsies”

Socialism With Chinese Characteristics, or, How Chicom Capitalism Really Works

How Can Canada Deal with Chicoms?

Mark Collins, a prolific Ottawa blogger, is a Fellow at the Canadian Global Affairs Institute; he tweets @Mark3Ds


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