CHINA’S plan to cut its steel production capacity by 100-150 million tons will lead to the loss of up to 400,000 jobs, the Xinhua news agency reported.

    The country’s State Council, or Cabinet, announced the plan to reduce crude steel capacity by that extent Sunday, as the government fights overcapacity. There was no timeframe given.

    The production cut will lead to the layoff of up to 400,000 workers, Xinhua quoted Li Xinchuang, head of the China Metallurgical Industry Planning and Research Institute, as saying in a report late Monday.

    “Large-scale redundancies in the steel sector could threaten social stability,” Xinhua quoted Li as saying.

    China’s steel sector, the world’s biggest, has been saddled with excess capacity for years, with some analysts estimating the surplus at around 300 million tons, equivalent to three times the annual output of No. 2 producer Japan.

    And the glut has been felt even more in the past two years as China’s steel demand shrinks amid a slowing economy.

    That is forcing more Chinese steel producers to ship surplus output overseas, with exports rising to a record 112.4 million tons last year, angering producers elsewhere and raising trade tensions with China.

    China will raise funds to help workers should they lose their jobs when coal and steel firms close amid campaigns to cut overcapacity, according to Xinhua.

    Apart from steel, the Cabinet also said coal production capacity will be reduced by “a relatively large amount.”

    To deal with looming redundancies, an “industrial restructuring fund” was initiated Jan. 1, pooling money from factories across the nation based on their power consumption, Xinhua said.

    Brokerage Shenwan Hongyuan Securities estimates the fund could draw in 46.8 billion yuan (US$7.11 billion), according to Xinhua.(SD-Agencies)