[BEIJING] The Chinese central government will earmark 27.64 billion yuan (S$5.84 billion) to help local governments pay for capacity closures in the steel and coal sectors this year, the finance ministry said on Thursday.
The industrial enterprise restructuring funds will come in two parts, with the first used to pay for the relocation of laid-off workers, and the second used at the end of the year to reward local authorities that have exceeded their closure targets, the Ministry of Finance said on its website.
China has pledged to cut 100 million to 150 million tonnes of crude steel production and 500 million tonnes of coal production in the next three to five years as it tries to tackle price-sapping capacity gluts in the sectors.
China plans to allocate a total of 100 billion yuan to help local authorities and state-owned firms finance layoffs in the two sectors this year and in 2017, with 20 per cent of the total used to reward high achievers.
Layoffs from the two sectors are expected to total 1.8 million people, according to official estimates.
The ministry said in a separate statement on Wednesday that the industry restructuring funds would also be used to encourage local governments, enterprises and banks to facilitate company and debt restructuring as well as the liquidation of bankrupt assets.