China aims to lay off 5-6 million state workers over the next two or three years as part of efforts to curb industrial overcapacity and pollution, Reuters reports, citing unnamed sources.
The country’s leadership, obsessed with maintaining stability and making sure redundancies do not lead to unrest, will spend nearly 150 billion yuan (US$23 billion) to cover layoffs in just the coal and steel sectors in the next 2-3 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 payrolls 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.
Premier Li Keqiang promised in December that they would soon “go under the knife”.
The hugely inefficient state sector employed around 37 million people in 2013 and accounts for about 40 percent 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 around 28 million redundancies and cost the central government about 73.1 billion yuan in resettlement funds.
On Monday, Yin Weimin, the minister for human resources and social security, said China expects to lay off 1.8 million workers in the coal and steel industries, but he did not give a timeframe.
The government 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.
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