China announces layoffs to cut overcapacity in steel

The Dollar Business Bureau

China's minister of Human Resources and Social Security, Yin Weimin, has announced that China plans to relocate about 5 lakh workers this year, as it downsizes its state-owned businesses of coal, steel and other heavy industries.

Amid pressure from the international community to cut down on its steel manufacturing, China is showing that it is taking measures to tackle its overcapacity and subsequent dumping of surplus produce overseas. Even China's military, which is the largest in the world, is going to cut down 3 lakh troops.

China is said to have relocated 7.26 lakh employees in 2016, spending $4.3 billion in the process. Despite a large number of layoffs and the economic slowdown, the ministry said that it has managed to hold the urban unemployment rate at 4.2%, which is well within the proposed threshold.

Every year, in China, about 7 million newly-graduated youth enter the job market. The government states that it provides 13 million jobs in urban areas annually.

The Asian giant accounts for the supply of almost half the steel consumption in the world. Due to a slowing demand following muted global financial sentiment, it has been experiencing over-production. Dumping of cheap steel in other countries has not only caused China to come under the scanner of WTO but has also blocked to a great degree, its chances of being granted the status of a 'market economy'. The European Union, to protect local steel manufacturers, has imposed anti-dumping duty on imports of steel from China. India too has resorted to the same in order to stem the inflow of cheap steel from across the border.

China grew at 6.7% in 2016, due to diminishing global demand for its exports. Standard and Poor's has rated China as AA- with a negative outlook. An ageing population and declining exports are the two major factors which are likely to have a negative impact on China's GDP growth in the coming years. China's growth rate in 2016 was the lowest in 26 years.