CHENGDU, Nov. 29 (NBD) -- China's Eastern Province Shandong will overhaul its 125 “zombie enterprises” to bolster efforts to curb industrial overcapacity by the end of this year, according to the local government.

Shi Min, Deputy Party Secretary of State-owned Assets Supervision and Administration Commission (SASAC) of Shandong Province, introduced the definition of "zombie enterprises" as loss-ridden firms that are conceivably beyond recovery in at least three consecutive years, or in production suspension or half-suspension, or insolvent. 

Shandong has 321 "zombie enterprises", of which, 125 are among the province's top priority to deal with this year, with 97 enterprises completed, and 28 others under the audit of asset and capital verification.

Zombie enterprises in general have presented a challenge to China’s economy, since these state owned firms have faced high levels of debt or overcapacity. Many SOEs in sectors that have reached overcapacity have committed to laying off workers, but some local governments have pledged to keep SOEs in overcapacity sectors alive in order to preserve jobs. This points to geographical differences in treating zombie firms. 

The clearing of "zombie enterprises" would be dealt case by case. In the first three quarters of the year, the large loss makers reduced their losses by 3.45 billion yuan (about 500.81 million US dollars).

China’s State-owned Assets and Administration Commission (SASAC) has promised to cut away zombie firms as part of a larger reform target to increase the efficiency of SOEs and allow for mixed-ownership reform.