Chinese steel, coal workers steel themselves for layoffs

The Chinese government for years has considered overcapacity — too much supply, not enough consumption — especially in the steel industry is its main economic challenge. New reforms promise to counteract that.

KEY POINTS

• China plans to lay off 5 to 6 million steel and coal workers
• Chinese gov’t will spend $23 billion USD in compensation
• U.S. imposes 266-percent tariffs on Chinese steel
• Chinese coal consumption decreasing since 2013
• Probably going to see worsening overcapacity in Chinese steel and coal industries

Source

As part of China’s upcoming Five-Year Plan, the Chinese government will be overseeing layoffs of 5 to 6 million workers in the steel and coal industries.

The Thirteenth Five-Year Plan, which will cover 2016 to 2020, is expected to be initiated this month.

CBC released a video summarizing the Thirteenth Five-Year Plan.

This is all part of China’s attempt to close “zombie” state companies, which are state-owned enterprises near bankruptcy that employ workers simply to avoid social unrest.

The Chinese state will compensate laid-off workers to continue the avoid labor protests and other unrest. The government has planned to spend 150 billion yuan ($23 billion USD) on steel and coal worker compensation.

But the Chinese steel industry also faces a 266-percent tariff on Chinese steel imports imposed by the U.S. on Wednesday. The tariffs also hit other countries, such as Brazil and South Korea, but nowhere near as hard as the triple digits hitting China.

The U.S. government imposed the tariffs after U.S. steel manufacturers laid off about 12,000 workers and lost $9.4 billion USD last year to a large increase in steel imports.

China’s layoffs are not directly related to the new tariff, but if the U.S. imports less steel from China, the next Five-Year Plan may still have to tackle steel overcapacity.

As for overcapacity in China’s coal industry, there has been a decrease in Chinese coal consumption since 2013.

This is not the first time China has seen huge layoffs. In the late 1990s, 20 to 35 million workers lost their jobs at state-owned enterprises for similar reasons: the Chinese government was determined to remove debt and overcapacity from its economy wherever it could find it.