Downturn in key commodities to cost China 3 million jobs – report

Layoffs in industries plagued by overcapacity are expected to reach 3 million in the next one or two years, Chinese media said quoting a Chinese investment bank.

However, this figure will only lead to a “marginal increase” in unemployment, the China International Capital Corp predicted, according to China Daily newspaper.

The estimate is based on the assumption that the five industries mired in overcapacity will shed 30 percent of their capacity.

As a result, 3 million jobs would be cut from the 10 million currently available in the coal, steel, electrolytic aluminum, cement and glass industries.

The report comes as Beijing prepares to tackle increased unemployment by shedding excess capacity-a top priority for this year, the newspaper said.

Yang Weimin, deputy director of the Office of the Central Leading Group on Financial and Economic Affairs, said if so-called zombie firms were allowed to continue operating through hefty subsidies, profitable companies would be “dragged to their deaths”.

“The right approach is to tackle zombie companies resolutely. Only when excess capacity is shed, can price falls be stopped and good companies see hope,” the paper quoted Yang as saying..

While declaring its resolve to tackle the problem, Beijing has vowed repeatedly to minimize the social pain, it said, adding that local governments were told at a December meting of top leaders to turn to mergers and acquisitions and to avoid bankruptcy and liquidation when dealing with firms that are unviable.

A special fund will be set up at central government level to reward local governments that succeed in cutting overcapacity. The money will be used chiefly as compensation for layoffs.

 

 

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