Will China, Inc. be zombified?

Modified from a photo by RJD via Wikimedia CommonsThe photo above is not from China; it’s from Japan. In the 1970s, Daiei was Japan’s top retailer. But after Japan’s asset bubble burst around 1990, it became Japan’s most famous “zombie” company — staggering along unprofitably, kept afloat by a constant stream of below-market-rate loans from UFJ Bank and other big Japanese banks. Eventually the company was acquired by Aeon, a more successful retailer, and its once-storied brand is slated to be retired for good in the next few years. I tend to be very skeptical of comparisons between post-1990 Japan and post-2021 China, because there are just so many differences between the two economies (and between the global economic environments at the time). Their industrial policies are different, their trading relationships are different, their bubbles and busts happened for very different reasons, and so on. But in the case of “zombie” companies, there may be some important parallels.What’s…