Xinhua, Beijing :
Ongoing excess capacity reduction in China will result in job losses, less consumption, slower growth and higher debt, UBS Securities said in a report.
The lengthy report, titled “The Economic and Financial Impacts of Excess Capacity Reduction,” identified coal mining and iron & steel as the main excess capacity sectors, while cement, flat glass, aluminum smelting and ship building are also included.
The Chinese government made reducing excess capacity a top priority in late 2015 at the Central Economic Work Conference and put it at the center of the 13th Five-Year-Plan.
China plans to cut steel and coal capacities by about 10 percent-as much as 150 million tonnes of steel and half a billion tonnes of coal-in the next few years with funds set aside to help displaced workers.
“We estimate that a 10-percent capacity reduction in six excess capacity industries may lead to job losses of 3 to 3.5 million people, a 0.2-percentage-point decline in consumption growth, and less than 0.5-percentage-point drop in GDP growth,” said the report.
Overall, the effect on growth and employment will be manageable, but concentrated in a few provinces such as Hebei, Inner Mongolia, Jiangsu, Shaanxi and Shanxi. The concentrated nature of excess capacity means closures may be devastating for local economies, which will require central government support.
Ongoing excess capacity reduction in China will result in job losses, less consumption, slower growth and higher debt, UBS Securities said in a report.
The lengthy report, titled “The Economic and Financial Impacts of Excess Capacity Reduction,” identified coal mining and iron & steel as the main excess capacity sectors, while cement, flat glass, aluminum smelting and ship building are also included.
The Chinese government made reducing excess capacity a top priority in late 2015 at the Central Economic Work Conference and put it at the center of the 13th Five-Year-Plan.
China plans to cut steel and coal capacities by about 10 percent-as much as 150 million tonnes of steel and half a billion tonnes of coal-in the next few years with funds set aside to help displaced workers.
“We estimate that a 10-percent capacity reduction in six excess capacity industries may lead to job losses of 3 to 3.5 million people, a 0.2-percentage-point decline in consumption growth, and less than 0.5-percentage-point drop in GDP growth,” said the report.
Overall, the effect on growth and employment will be manageable, but concentrated in a few provinces such as Hebei, Inner Mongolia, Jiangsu, Shaanxi and Shanxi. The concentrated nature of excess capacity means closures may be devastating for local economies, which will require central government support.
