China to lay off '5m to 6m state workers'

BEIJING • China aims to lay off five million to six million state workers over the next two to three years as part of efforts to curb industrial overcapacity and pollution, two reliable sources said yesterday.

China's leadership, obsessed with maintaining stability and making sure redundancies do not lead to unrest, will spend nearly 150 billion yuan (S$32 billion) to cover layoffs in just the coal and steel sectors in the next two to three years.

The overall figure is likely to rise as closures spread to other industries and even more funding will be required to handle the debt left behind by "zombie" state firms.

The term refers to companies that have shut down some of their operations but keep staff on their rolls since local governments are worried about the social and economic impact of bankruptcies and unemployment.

Shutting down "zombie" firms has been identified as one of the government's priorities this year, with Premier Li Keqiang promising last December that they would soon "go under the knife".

The government plans to lay off five million workers in industries suffering from a supply glut, one source with ties to the leadership said. A second source put the number of layoffs at six million. Both asked not to be identified.

The Ministry of Industry did not immediately respond when asked for comment on the reports.

The hugely inefficient state sector had around 37 million employees in 2013, and accounts for about 40 per cent of the country's industrial output and nearly half of its bank lending.

It is China's most significant nationwide retrenchment since the restructuring of state-owned enterprises from 1998 to 2003 led to about 28 million redundancies and cost about 73 billion yuan in resettlement funds.

On Monday, Minister for Human Resources and Social Security Yin Weimin said China expects to lay off 1.8 million workers in the coal and steel industries, but he did not give a timeframe.

China aims to cut capacity gluts in as many as seven sectors, including cement, glassmaking and shipbuilding, but the oversupplied solar power industry is likely to be spared any large-scale restructuring because it still has growth potential, the first source said.

The government has already drawn up plans to cut up to 150 million tonnes of crude steel capacity and 500 million tonnes of surplus coal production in the next three to five years.

It has earmarked 100 billion yuan in central government funds to deal directly with the layoffs from steel and coal over the next two years, Vice-Industry Minister Feng Fei said last week.

The Ministry of Finance said in January that it would collect 46 billion yuan from surcharges on coal-fired power over the coming three years in order to resettle workers.


A version of this article appeared in the print edition of The Straits Times on March 02, 2016, with the headline 'China to lay off '5m to 6m state workers''. Print Edition | Subscribe