1 Introduction 3

2 Data 6

3 Zombie Firm Prevalence and Persistence 7

  3.1 Zombie Prevalence and Characteristics 7

  3.2 The Bank–Zombie Nexus: Why Zombies Persist 10

  3.3 Zombie Lending and Bank Health 11

  3.4 Evergreening and Bank Relationships 14

4 Domestic Macroeconomic Consequences 17

  4.1 Firm-Level Effects 18

  4.2 Contagion Effects  21

  4.3 Macro Effects  23

5 Cross-Border Spillovers to Advanced Economies 23

  5.1 Baseline: Trade-Weighted Zombie Spillovers 26

  5.2 Mechanism I: Import Price Channel 35

  5.3 Mechanism II: Intermediate Goods 36

  5.4 Mechanism III: China vs. Rest of Asia 41

  5.5 Bank Lending-Weighted Zombie Spillovers 43

  5.6 Zombie Exposure and Bank Health 46

  5.7 Reconciling Trade and Bank Lending Channels 49

6 Conclusion 50