China prepares for huge job losses as it cuts steel production capacity

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Closure of steel plants in China to cut production by up to 150 million could translate into 400,000 job losses, raising fears of social instability in a slowing economy, a state-run metals industry consultancy said.

Crude steel production capacity will be cut by 100 to 150 million tonnes, while coal production will be reduced by “a relatively large amount,” the State Council said in a statement on Sunday. It did not give a time frame in which the exercise will be completed.

There are plans to set up a fund to help workers re-establish themselves in case of anticipated job losses and closure of steel mills battered by low prices and excess capacities.

The steel production slash could translate into the loss of jobs for up to 400,000 workers, Xinhua quoted Li Xinchuang, head of China Metallurgical Industry Planning and Research Institute, as saying.

Li said more people will be affected in the upstream and downstream industries. “Large-scale redundancies in the steel sector could threaten social stability.”

In the coal sector, 7,250 mines with outdated production capacity have been closed in the last five years, Xinhua reported, and a large number of coal workers are expected to be made redundant too in the moths to come.

The government has already said it was banning new mines for the next three years, and an industrial restrcuturing fund has been initiated with contributions from factories across the country.

“As required by the State Council, related departments are formulating rules on the use of the industrial restructuring fund,” Jiang Zhimin, vice head of China National Coal Association said, according to Xinhua.

“As far as I’m concerned, the bulk of the fund will be allocated to redundant workers,” said Jiang. The fund will be partly used to compensate laid-off workers, according to Sunday’s statement.

The government has called on enterprises to think outside the box and find ways to reduce redundancies and compensate laid-off workers. It is also encouraging laid-off workers to start their own businesses, with tax breaks and other preferential policies.

A previous round of economic restructuring in the 1990s, when China was transforming from a planned economy to a market economy, saw tens of millions of people losing their jobs, particularly those employed by state-owned enterprises, Xinhua said, adding thata lthough many redundant workers started businesses, rising unemployment created social problems.

The World Steel Association has said that global steel production fell the most in six years in 2015. China led the decline, with output falling by 2.3 percent to 804 million metric tonnes.

 

 

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