Based on a large database containing over 300,000 Chinese firms and detailed micro-level information, this paper conducts an empirical analysis of firms in distress. We focus on economic distress rather than financial distress; we study unlisted firms in an emerging market rather than listed firms in a developed economy. We identify survival strategies taken by distressed firms and the determinants of these observed activities. We show that three of the observed survival strategies are indeed helpful for a distressed firm to recover: reliance on fixed assets, reliance on intangible assets, and reduction of costs. We show a critical role of institutional development in a developing economy, where the institutional level is measured by the development of product markets, financial markets and legal environment.