Hostesses sit in a bus outside the Great Hall of the People in Beijing during the second day of the National People's Congress annual session on Sunday. Photo: AFP

China's top economic planner said Sunday reducing overcapacity will "definitely not" lead to another wave of mass layoffs.

On the sidelines of the national legislature's annual session, Xu Shaoshi, head of the National Development and Reform Commission (NDRC), said curbing overcapacity has been ongoing for several years and greater efforts will be made. Previous experience shows local governments have been successful in resettling workers affected by the country's drive to reduce the oversupply in the steel and coal industries, he said.

Within five years, excess steel capacity will be cut by 100-150 million tons and another 500 million tons will be cut in coal production within three to five years, according to Xu.  However, "with the central government's guidance and local governments' meticulous arrangements," the country won't see a second wave of massive layoffs.

In the late 1990s, the country reportedly laid off 30 million employees as part of an overhaul of its bloated State sector.

China's coal and steel industries will have to deal with the resettlement of approximately 1.8 million workers as part of efforts to cut industrial oversupplies, Yin Weimin, minister of human resources and social security, said at a news conference in February, without giving a timeframe.

"Overall, China aims to lay off 5-6 million state workers over the next two to three years," Reuters reported earlier this month citing two sources it didn't identify, in an unconfirmed measurement of the country's retrenchment program.

A less bleak forecast was provided by Li Chang'an, a professor of the School of Public Administration at the University of International Business and Economics, who told the Global Times Sunday that if all other industries which suffer from overcapacity, such as the chemical industry, as well as related industries and suppliers across the entire supply chain, the number of layoffs could reach between 4 million and 5 million.

Pushing back against layoff concerns, Li noted that "China's social security system is much more mature, economic volume is much greater and fiscal revenue is also much larger than in the late 1990s. As long as the government puts people first and focuses on vocational training and offers better social security benefits, there won't be massive layoffs."

'Optimistic' job market

Instead of supporting unprofitable enterprises, the central government has chosen to help relocate workers laid off as part of the country's efforts to restructure the economy, including shutting down some companies, Li Yining, a renowned economist and political advisor, told reporters Sunday.

The central government will allocate 100 billion yuan ($15.33 billion) to resettle workers retrenched as part of the nation's drive to reduce overcapacity, Premier Li Keqiang said in his government work report on Saturday at the opening of the National People's Congress.

It should also be noted that being retrenched is a painful experience, and this new round of layoffs involves not only workers in the State sector but also in private enterprise, which will require efforts beyond fiscal support.

The long term solution to unemployment is to vigorously develop the services sector, especially emerging industries, to absorb laid-off workers.  In the short term, the government should focus on providing on-the-job training as well as other types of vocational training to redirect laid off workers to jobs in the services sector in larger cities, Qian Jun, a professor of finance at the Shanghai Advanced Institute of Finance of Shanghai Jiao Tong University, told the Global Times, on Sunday.

At the same time, the government should consider publishing quarterly data on emerging industries, which would not only reflect the state of China's economy but also allow the labor market to assess which sectors develop faster so that they can help reallocate labor in China, Qian said.  

Xu also said he remains optimistic over the country's job market, citing several factors he believes would contribute to an overall upbeat outlook.

Measures have been taken by some enterprises, including cuts in working hours and salaries to prevent employees from being fired, he said.

The size of the Chinese economy continues to grow, albeit at a slower pace, which means a continuing increase in the number of jobs, the NDRC chief said, adding that the rapidly growing services sector, the growing interest in innovation and entrepreneurship, among other factors, is proof of an optimistic outlook for the job market.

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