China expects to lay off 1.8 million workers in coal, steel sectors

China said on Monday it expects to lay off 1.8 million workers in the coal and steel sectors as part of efforts to reduce industrial overcapacity, but no timeframe was given.

China has vowed to deal with excess capacity and eliminate hundreds of so-called “zombie enterprises” – loss-making firms in struggling sectors that are being kept alive by local governments trying to avoid job losses.

Yin Weimin, the minister for human resources and social security, told a news conference that 1.3 million workers in the coal sector could lose jobs, plus 500,000 from the steel sector. It was the first time a senior government official has given a number for job losses as China deals with industrial overcapacity amid slowing growth.

“This involves the resettlement of a total of 1.8 million workers. This task will be very difficult, but we are still very confident,” Yin said.

For China’s stability-obsessed government, keeping a lid on unemployment and any possible unrest that may follow has been a top priority.

The central government will allocate 100 billion yuan ($15.27 billion) over two years to relocate workers laid off as a result of China’s efforts to curb overcapacity, officials said last week.

China’s vice finance minister Zhu Guangyao quoted Premier Li Keqiang as telling U.S. Treasury Secretary Jack Lew on Monday that the fund would mainly focus on the steel and coal sectors.

“The economy faces relatively big downward pressures and some firms face difficulties in production and operation, which would lead to insufficient employment,” Yin said, adding that increasing graduates this year would also add pressure in the job market.

Despite of economic downturn, there have been no reports of mass layoffs as occurred during the global financial crisis, with the survey-based jobless rate published by the National Bureau of Statistics staying at around 5.01 percent at the end of last year.

The registered urban jobless rate published by the human resources and social security ministry was at 4.05 percent at the end of 2015.

However, many economists believe the few official employment readings in China underestimate the number of jobless.

Source: Reuters