Overcapacity in China’s coal and steel industries will send 1.8 million workers, or 15 percent of the workforce, packing.
While no time frame was given, the major employee cuts underpin shrinking demand in China’s industrial sector and the overall slowing growth of the economy. The staggering number of layoffs is adding to fears over China’s stability, as the government usually tightly controls unemployment to prevent fermenting unrest among the population, reports Business Insider.
“This involves the resettlement of a total of 1.8 million workers,” Yin Weimin, the minister for human resources and social security said at a news conference. “This task will be very difficult, but we are still very confident.”
The ravaged coal sector will end up costing roughly 1.3 million coal jobs. The steel sector will fair slightly better, but is still projected to lose an immense 500,000 workers. The coal and steel industries employ roughly 12 million people, according to Reuters.
China plans to set aside 100 billion yuan, or $15.27 billion, to relocate fired employees and their families over the next two years. The Chinese economy continues to struggle, posting a 15-year low growth rate in 2015 amid financial instability, cheap oil and unstable monetary policy.
“The economy faces relatively big downward pressures and some firms face difficulties in production and operation, which would lead to insufficient employment,” Weimin said at the press conference.
Unemployment in China sits around 5 percent and the services sector is booming despite the many other drags on China’s economic growth. Dealing with the unprecedented cleansing of coal and steel workers in China will pose significant challenges to the currently ailing government.
“It’s difficult to predict a timeframe but it will not be a quick process,” Jiang Feitao, industry researcher with the China Academy of Social Sciences told Reuters. “There are many issues to be dealt with, including how to pay debt as well as layoffs.”
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