China Corporate Monitor 2026: The Missing Spark - Why Cheaper Money Has Yet to Ignite China's Corporate Recovery

Key Takeaways

• 1.Cheaper financing has eased debt-service burdens and stabilized headline solvency, but has failed to reignite broad corporate growth due to weak domestic demand, cautious consumers, and industrial overcapacity.
• 2.Credit divergence is worsening: while aggregate interest coverage shows mild improvement among larger firms, the share of distressed 'zombie' firms (EBITDA below interest expense) surged from ~6% in 2019 to 12.5% in H1 2026.
• 3.Private enterprises (POEs) outperform state-owned enterprises (SOEs), recording higher profit margins, return on capital, and capex rebounds after aggressive deleveraging, whereas local SOEs remain severely strained with heavy zombie ratios.

Table of Contents

• Key Macro Trends: Missing spark from current policies
• Structural Slowdown
• Changing Policy Priorities
• Incomplete Growth Transition
• China Corporate Monitor 2026: Debt relief can't fully buffer weaker return
• Methodology
• Overview: Key indicators
• Overall Debt Dynamics, Revenue Generation and Return on Capital
• Divergence and Ownership Breakdown: Local SOEs vs POEs
• Sector Ranking
• Key findings
• Energy Behind AI: Tailwinds from global power revival
• Data on Selected Sectors

Report data

China: Zombie Ratio By Sector (%)