China Allocates $ 4 Billion to Fund Reduced Steel and Coal Capacity

China's central government will set aside 27.64 billion yuan ($ 4.23 billion) to help local governments pay for the shutdown of metallurgical and coal production facilities this year, the Treasury Department said Thursday.

The restructuring funds for manufacturing enterprises will be split into two parts: the first will be used to pay for the relocation of laid-off workers, and the second at the end of the year to reward local governments that have exceeded their closure targets, the Finance Ministry said on its website.

China has pledged to cut 100 to 150 million tonnes of crude steel and 500 million tonnes of coal production over the next three to five years to address sector surpluses. China plans to provide a total of 100 million yuan to help local governments and state-owned firms fund layoffs in these two sectors this year and in 2017.

Layoffs from the two sectors are expected to total 1.8 million, according to official estimates. The ministry said the industry restructuring funds will also be used to stimulate local governments, businesses and banks to assist companies and restructure debt and liquidate bankrupt assets.