IMF says zombie companies now hold over a fifth of Asia's corporate debt
The IMF warns that zombie firms—unable to cover interest for three years—now represent more than 20% of Asia’s corporate debt, raising systemic risk concerns.
The IMF defines zombie companies as those whose earnings have failed to meet interest obligations for at least three years. It reports that such firms now account for over one-fifth of corporate debt across Asia, a share that has more than doubled since 2008. Analysts note the issue is worsening in China, where state subsidies for high-tech sectors have spurred growth without profitability. The IMF previously cautioned that Beijing’s subsidies, equal to about 4% of GDP, are fostering inefficient enterprises.
Why it matters
A surge in non-profitable, heavily indebted firms could destabilize Asian credit markets and slow economic growth.
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