China isn't just contending with falling stocks, a plunging currency and a slowing economy.
It's got vampire trouble, too.
The Chinese economy is pock-marked with companies that can't pay their bills and survive only with government help. Jiangshi, the Chinese call them — "vampire companies." Or zombies.
These ghoulish companies and their debts are hindering the world's second-biggest economy and will likely do so for years. Companies that miss debt payments inflict losses on banks, which then find it hard to lend even to solid companies. By propping up vampire companies, the government can weaken the entire economic ecosystem.
All of which helps explain why the global economy is sputtering and why investors have been gripped by panic.
"It's undoubtedly a very serious problem," says Charles Collyns, chief economist at the Institute of International Finance. "The Chinese so far have been very reluctant to let market mechanisms work their way."
On Friday, as finance ministers and central bankers of the Group of 20 major economies began meeting in Shanghai, Zhou Xiaochuan, head of China's central bank, insisted that Chinese authorities closely monitor debt loads. Even so, he said he expects China's economy "to grow at a moderate-to-high pace."
The debt buildup is vast. Chinese corporations (excluding financial companies) had amassed $14.5 trillion in debt by mid-2015, up 4½-fold from eight years earlier, according to the McKinsey Global Institute.
That debt equaled 131 percent of China's gross domestic product, up from 76 percent in mid-2007. That's nearly double U.S. corporate debts' share of U.S. GDP, McKinsey says.
China's total debts — everything owed by corporations, households, government and financial firms — climbed from $6.6 trillion in mid-2007 to $31.9 trillion by mid-2015. It equals 290 percent of China's GDP, McKinsey says — astoundingly high for a still-developing economy.
When banks lend with a frenzy, they tend to make blunders as they shovel money to companies that can't repay. Buried in bad loans, banks tend to curtail the credit that's vital to growth.