**Submission Statement:** The article presents the case that 2020’s China may be developing a “zombie company” problem, similar to Japan in the 1990s. Banks and regulators appear to be rolling over loans to weak/struggling companies rather than forcing defaults or restructuring. While China’s centralized economy and banking system is arguably in a more robust position than Japan was, the deeper risk is the “zombie companies” becoming a dead zone; consuming labor & capital that “healthy” companies could use more efficiently. China continues to subsidize inefficient capacity, which may turn into a long-term drag on productivity and growth.
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**Submission Statement:** The article presents the case that 2020’s China may be developing a “zombie company” problem, similar to Japan in the 1990s. Banks and regulators appear to be rolling over loans to weak/struggling companies rather than forcing defaults or restructuring. While China’s centralized economy and banking system is arguably in a more robust position than Japan was, the deeper risk is the “zombie companies” becoming a dead zone; consuming labor & capital that “healthy” companies could use more efficiently. China continues to subsidize inefficient capacity, which may turn into a long-term drag on productivity and growth.
Meanwhile, the latest numbers show that [Chinese industrial profits](https://www.reuters.com/world/asia-pacific/chinas-industrial-profits-grow-182-january-april-2026-05-27/) grew at 24.7% in April, accelerating the trend of 18.2% for 2026.