Research On Chinese Manufacturing Zombie Firm Problem From The Angle Of Supply-side Reform

The report of the 19 th CPC National Congress points out that the construction of socialism with Chinese characteristics has entered a new era and China will realize the goal of building a strong socialist modernization country in the middle of the 21 st century.The key to building a strong socialist modernization country in the new era is to promote the quality of supply of real economy so as to establish the superiority of economic quality.Manufacturing is not only the core of the real economy,but the foundation of sustainable development.It is self-evident that keeping manufacturing running healthily and efficiently is important.Although China now has a large as well as complete production system and capacity,manufacturing still does not possess high quality so it is difficult to cope with the change of consumption structure in time.Therefore,improving the supply quality of manufacturing through the structural reform of supply side becomes the only way to develop manufacturing industry in the new era.Solving the problem of manufacturing zombie firms is the core of it.After China's entering the late stage of industrialization,the slowdown trend of economic growth from high speed to medium speed is obvious,and manufacturing is more seriously affected.In 2015,the growth rate of value added of manufacturing industry in China was only 3.5%,which was the lowest in the past decade.Although there has been a slow recovery since 2016,the growth has been exhausted.Contradictions such as overcapacity,rising costs,declining profits and high inventories have emerged.Behind these surface contradictions,the deep structural contradictions deserve more attention.At present,the deep contradictions in China's manufacturing are mainly manifested in the mismatching of supply and demand,that is,the mismatching of supply and demand;the market is hard to clear.On the one hand,the supply of low-end products is far more than the demand,resulting in a serious surplus of products as well as a large amount of waste of resources.On the other hand,the supply of high-end products can't meet the demand well,both the quality and quantity of products are insufficient,and the market share is occupied by foreign countries.This phenomenon stems from the fact that China's manufacturing has relied excessively on factor input for a long time to obtain growth,thus forming low-end path dependence.The result of low-tech input is inevitably low-end output,unable to adapt to the international and domestic gradual improvement of product refinement,high-end,personalized needs.Therefore,China's manufacturing must achieve transformation and upgrading through supply-side structural reform from ineffective low-end supply to efficient high-end supply,to achieve the unity of supply and demand in manufacturing.The fundamental purpose of supply-side structural reform is to enhance total factor productivity.The way to improve TFP can be summed up as technological progress and resource reallocation.Solving the problem of zombie firms is the latter.Thus,the logical relationship between the problem of zombie firms and the supply-side structural reform established.As the representative of low-end ineffective supply,zombie firms occupy a lot of valuable resources such as funds,land,machinery and equipment for a long time without producing economic benefits,which directly reduces the efficiency of the use of production factors.Also,they have spillover effects on normal enterprises,affecting their healthy operation.As an ineffective supply that should be withdrawn from the market,zombie firms continue to survive in the market,and even continue to expand the already surplus capacity,which is a major obstacle to the transformation of supply and the improvement of supply quality in China's manufacturing.Since zombie firms are a kind of micro supplier,the problem of zombie firms is first and foremost the problem of supply side.The task of solving the problem of manufacturing zombie firms is both arduous and urgent.From the perspective of supply-side structural reform,the paper studies the problem of manufacturing zombie firms in China,which helps to understand the essence of zombie firms,and remove this obstacle for the transformation and upgrading of manufacturing.Taking the structural reform of supply side as the perspective of observation,taking socialist political economy with Chinese characteristics as the theoretical foundation,taking the pillar manufacturing of China's real economy as the research subject,the paper aimed at solving the problem of zombie firms.Firstly,according to the theory of Marxist political economy and economics,the paper explained the essence of the zombie firm problem,which laid a theoretical foundation for the research.At the same time,in order to inherit the existing research results better,the paper made research on zombie firms in accordance with China's conditions and reality,and then analyzed the relevant literature at home and abroad.Secondly,according to the actual situation of our country,the paper amended the international popular zombie firm identification law,and showed the current situation of manufacturing zombie firm problems in China by dividing regions,industries and ownership.The analysis of the hazards of zombie firms showed that the problem of zombie firms is a major obstacle to the transformation and upgrading of supply in manufacturing.To resolve the structural contradictions in manufacturing,zombie firm problem must be solved properly.Thirdly,the paper analyzed the formation mechanism of manufacturing zombie firms from the perspective of supply side,and took the problem of zombie firms as the supply problem,which was conducive to discovering the essential causes of zombie firm problem in depth.Furthermore,this paper validated the impact of supply and demand mismatch caused by zombie firms through empirical analysis,and investigated the magnification of government intervention factors on the harm of zombie firms,aiming to prove that relying on market is the best way for the zombie firms toexit.Finally,this paper took Japan and Korea,which are representative countries of the East Asian model similar to China,as samples,and put forward suggestions to solve the problem in China on the basis of analyzing the successful experiences and failures of the two countries in dealing with the problem of zombie firms.Based on the perspective of supply-side reform,this paper made a comparatively complete study on the current situation,hazards,formation mechanism,international comparison and countermeasures of manufacturing zombie firm problem in China.The main conclusions of the study are as follows:Firstly,the problem of manufacturing zombie firms in China is not a cyclical problem,and can't be solved by stimulating economic policies.As the main supplier,Chinese manufacturing firms have poor adaptability to the changes of quality and quantity of demand.Once faced with demand shocks,zombie firm problem will break out.Stimulus policy can only cover up the contradiction between supply and demand structure,so the effect of stimulus policy on manufacturing zombie firm problem in China is short,and the solution needs to start with supply-side management.Secondly,it is a complex process of change from a normal firm to a zombie firm,which is the result of many factors.First of all,the imbalance of industrial supply structure is the external incentive for the formation of manufacturing zombie firms.Due to industrial policy guidance,intergovernmental competition and macroeconomic fluctuations,industrial supply structure will be unbalanced.In industries with excess capacity,zombie firms are more likely to breed.Then,the low quality of enterprise supply is the internal basis for the formation of manufacturing zombie firms.Insufficient innovation ability,unreasonable management system and lack of excellent corporate culture will lead to the low quality of enterprise supply,thus gradually losing self-supporting ability;only by relying on external support can continue to survive.Finally,ineffective supply can't be eliminated is the essential reason for the formation of manufacturing zombie firms.Zombies failed to be eliminated by market due to the soft budget constraints imposed by banks and governments and the hindrance of inefficient delisting mechanism.Thirdly,manufacturing zombie firms restrain the matching of supply and demand,and non-state-owned firms become the main victims,and the strengthening of government intervention will deepen the harm.As an ineffective supply,zombie firms not only occupy a large number of limited resources,but also destroy the market competition order,aggravate the financing constraints faced by normal firms,hinder the incremental quality of effective supply,and thus have a negative impact on the matching of supply and demand.It can be found in the crowding-out effect of zombie firms on the export scale.Because of the ownership advantages of state-owned enterprises,the influence of zombie firms is not significant,while the vitality of private economy is restricted by the problem of zombie firms.In addition,the negative effect of government intervention factors shows that administrative means are not conducive to directly solve zombie firm problem,and it is the best choice to promote the self-withdrawal of zombie firms under the influence of the market.Fourthly,the fundamental solution to the problem of manufacturing zombie firms in China lies in the supply-side reform,i.e.the reform of the system and mechanism.The foothold is to establish and maintain normal bank-enterprise relationship and reasonable government-enterprise relationship.First of all,after entering the new normal,the problem of zombie firms is not a cyclical problem but a periodic problem.It should be re-examined from the perspective of supply side and solved through the reform of system and mechanism.Then,the establishment of normal bank-enterprise relationship is an important step.Building a complete market needs to push forward the reform of financial market and state-owned enterprises,remove the restrictive factors of market mechanism in resource allocation,and promote state-owned enterprises to become the real market subjects.Finally,the establishment of a reasonable government-enterprise relationship is another important step.The implementation of limited government needs to deepen the reform of administrative system so as to reduce the government's intervention in the economy and make the market mechanism play a full role in the allocation of resources.Fifth,because the causes of the manufacturing zombie firm problem in China are complex,the solutions also need to work together from many aspects to coordinate the economic restructuring and institutional mechanism reform,including industrial structure and enterprise structure.The countermeasures at the industrial level are to alleviate the imbalance of industrial supply structure,the countermeasures at the enterprise level are to improve the supply quality of the main body of the market,and the countermeasures at the institutional level are to promote the reform of the market system and mechanism,solving zombie firm problem along the way of reducing stock and controlling increment.The main academic contributions of this paper are as follows:Firstly,from the perspective of supply side,the paper pointed out the internal relationship between the zombie firm problem and the structural reform of supply side.From the perspective of supply side,the problem of zombie firms is how to eliminate old supply smoothly and transform it into new supply,how to reduce ineffective supply and increase effective supply.To solve the problem of zombie firms is to eliminate the obstacles of resource reallocation and ultimately improve total factor productivity.From the perspective of supply side,this paper analyzed the formation mechanism of manufacturing zombie firms in China,and laid a new theoretical foundation for resolving the contradiction of supply side.Secondly,the existing identification method was amended by adding government subsidy factors to the identification of manufacturing zombie enterprises in China,and a recognition method considering the soft constraints of subsidies was proposed in this paper.This paper empirically examined the impact of large sample data of manufacturing enterprises on the supply-demand mismatch caused by zombie firms.The negative effect of government intervention factors showed that administrative means are not conducive to solving the problem of zombie enterprises directly and it is the best choice to promote the self-withdrawal of zombie enterprises under the influence of the market.Thirdly,this paper pointed out that the problem of manufacturing zombie firms in China after entering the new normal is a periodic problem,which should be re-examined from the perspective of supply side and solved through the reform of the system and mechanism.The end point is to establish normal bank-enterprise relationship and reasonable government-enterprise relationship,so as to urge the zombie firms to withdraw by themselves under the influence of market.Then,this paper put forward countermeasures and suggestions to solve the problem of manufacturing zombie firms in China.