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- Title
WHY ARE CHINESE ZOMBIE ENTERPRISES STIFF BUT DEATHLESS?
- Authors
Weiwei Zhang; Lan Bo; Haque, Mahfuzul
- Abstract
While China is promoting the supply-side structural reform, the „stiff but deathless” zombie enterprises in the system soak up the economic resources and impede the growth of healthy and sustainable economic development of the country. This study on zombie enterprises could provide clues on the theoretical implications and understanding of the root reasons for the problem. From the game theory perspective, we analyse the internal mechanism of a stiff but deathless” zombie enterprise centred on a trilateral game model of the enterprise, government and banks. Then we develop the game model in the context of China by introducing the state-owned and private-owned enterprises. Moreover, a comparative case study on the two real zombie enterprises was conducted to explain the paradox in China. We find from the Nash equilibrium solution for rational government and banks is not to disrupt the development of zombie enterprises. However, the paradox in China shows that the government’s bailout and bank credit support are the main obstacles to clearing out the zombie enterprises. We suggest each party involved should follow the law and market economy in China to make both the enterprises and the economy vibrant.
- Subjects
CHINA; SUSTAINABLE development; FINANCIAL bailouts; GOVERNMENT business enterprises; NASH equilibrium; BANK loans
- Publication
Transformations in Business & Economics, 2022, Vol 21, Issue 1, p228
- ISSN
1648-4460
- Publication type
Article