Balancing Employment With Restructuring

Widespread concern exists both at home and abroad over potential layoffs accrued in Chinas current cycle of cutting overcapacity. The coal， iron and steel industries are bearing the brunt of the ongoing capacity reduction campaign， with the number of employees pending resettlement estimated at 1.8 million.

However， such concerns may be unnecessary partly because the Chinese Government wont allow huge layoffs to happen. Premier Li Keqiang， while inspecting the Ministry of Human Resources and Social Security on May 6， said that proper training and social insurance should be offered to workers in the process of cutting overcapacity in the steel and coal industries. Efforts should be made to prevent mass unemployment and the creation of zero-employment families—those in which no family members are steadily employed， he added.

The Chinese Government has prioritized stabilizing employment while cutting overcapacity and has rolled out a number of measures to resettle affected workers. For instance， the government will encourage companies to create new jobs for surplus workers from within by using existing equipment and technology， rather than laying them off. It will also provide training to improve workers technical skills and help them find new jobs.

Moreover， for workers less than five years from the retirement age and experiencing difficulty in getting reemployed， an option exists to resign voluntarily. Should they choose this option， their basic liv- ing expenses will be covered by their companies， which will also be responsible for handling basic pension and medical insurance fees， until they reach the formal retirement age. In addition， the government will provide job opportunities to older workers who have difficulty finding new work and zero-employment families as part of its public welfare program.

Notably， the Central Government will provide 100 billion yuan （$15 billion） of subsidies to help resettle workers affected by cutting overcapacity in the coal and steel sectors， according to the Government Work Report delivered by Premier Li in March.

The aforementioned measures， coupled with a thriving private sector and service industry， make a dramatic rise in unemployment unlikely. In the past， when the private sector was underdeveloped， a job with a state-owned enterprise （SOE） was regarded as an “iron rice bowl”—i.e. extremely secure. But now the number of jobs in private companies far exceeds those offered by SOEs. People no longer view SOEs as the sole employment option， and surplus workers in SOEs in the coal， iron and steel industries may find new jobs in the private sector.

Indeed， the current round of reforms affects the employment of only a few industries with excess production capacity. As long as the government， companies and employees involved work together to seek solutions that meet diverse needs， Chinas overall economic health will not be negatively impacted.