China is planning to lay off 1.8 million workers from the coal and steel sector owing to industrial overcapacity, Minister of Human Resource and Social Security Yin Weimin announced on Monday.
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No time frame was given for the 1.8 million figure cited.
Chinese officials have established a $100 billion yuan ($15.3 billion) fund to be used over two years to aid companies in resettling employees cut during the transition, the news agency said. The coal and steel industries employ roughly 12 million people, according to Reuters.
China’s leadership, obsessed with maintaining stability and making sure redundancies do not lead to unrest, will spend almost 150 billion yuan ($23-billion) to cover layoffs in just the coal and steel sectors in the next 2-3 years.
“Although this is a very hard task, in every respect, it is something that we must actively work to accomplish”, said Weimin in a news conference.
The number of layoffs was reasonable based on the government’s capacity closure targets, said Jiang Feitao – an industry researcher with China’s Academy of Social Sciences – a top government think tank.
“There is bound to be a tussle between the central and local governments”, the second source said.
“They have proposed this dedicated fund only to pay the workers, but there is no money for the bad debts, and if the bad debts are too big the banks will have problems and there will be panic”, said Xu Zhongbo, head of Beijing Metal Consulting, who advises Chinese steel mills.
During the economic crisis, an estimated 28 million Chinese workers were laid off. The government signalled it is not expecting mass layoffs like before.
Scrap metal exports from the US dropped 4.7% in the first half of 2015 compared to the first half of 2014, according to statistics gathered and summarized by the Journal of Commerce.
China said on Monday that urban employment held up in 2015 even as economic growth slowed, but the Human Resources ministry warned that the pace of job creation is slowing.
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However, many economists believe the few official employment readings in China underestimate the number of jobless.
