The local government of eastern China’s Shandong has identified 312 zombie companies in the province employing 121,023 workers of which many are within the steel sector. Removal of these organisations will be completed within three years, the provincial government says.

Zhang Xinwen is the director of the state-owned assets supervision commission in Shandong.  He defines zombie companies as those who show either consecutive losses for three years without the possibility of returning to profit or are insolvent. Companies that have discontinued operations and those running at half capacity also fall into the zombie category. The provincial government has already developed a three-year plan to eliminate such companies and will close 125 of them by end-2016, Kallanish notes. 

Based on capacity-cutting guidance from the Shandong government, the disposal of zombie companies is also part of the industrial restructuring which aims to reduce capacity and improve air quality. The Shandong Iron & Steel group, including its subsidiaries, are implementing capacity cuts at present.

Businesses in Shandong province during the first half year of 2016 generated total revenues of CNY 322.8 billion ($48.3 billion), a y-o-y increase of 4.8%. Total profits were CNY 7.1 billion, up 14% from a year earlier.