Despite talk of a “zombie economy”, China’s state-owned enterprises have enjoyed a sharp rebound in profits this year, driven by resurgent commodity prices amid government-enforced capacity cuts.
But economists worry that the revival of groups that once relied on state-directed loans and subsidies for life-support despite persistent operating losses may be unsustainable, and threatens to breed complacency about the need to reform SOEs.
A buoyant property market has fuelled China’s unexpectedly strong economic growth this year and boosted construction activity. Heavy fiscal spending on infrastructure by Chinese local governments has likewise heightened demand for basic commodities such as coal and metals — sectors dominated by state groups.
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