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Q&A: Overcapacity


Updated: 2016-03-16 13:51:23


Q&A: Overcapacity

Chinese Premier Li Keqiang gestures during a press conference at the Great Hall of the People in Beijing, capital of China, March 16, 2016. [Photo/Xinhua]

Bloomberg News: Mr Premier, in this news room last year you said China is determined to press ahead with reform that would be as painful as taking a knife to one's own flesh, and in this year's government report you talked about the need for a minimum 6.5 percent growth target, and we have also heard local officials saying there will not be layoffs as China presses ahead with overcapacity. So I am wondering how would you address concerns that the growth target and the desire to avoid potentially layoffs would bind China's hands and make it impossible to press ahead with reform that you said is crucial for Chinese economy?

Premiere Li Keqiang: One thing is certain: that we are determined to push ahead with our reform agenda. Reform and development are not in conflict with pursuing structural reform. We can further release market vitality and drive economic development. It is true that in some sectors there are serious problems of overcapacity, especially in heavy industries and petrochemical industries. We have selected the steel and coal sectors to start with the effort of cutting overcapacity and at the same time we will also avoid massive layoffs. In the past two years, we have been faced with up to one hundred million tons of steel making capacity involving some one million employees, with a high priority given to protecting the interests of employees. We have taken strong steps to resettle these people and give them re-employment opportunities, and good experience have been enjoyed from the process. In a word, we will press ahead to deal with overcapacity and at the same time make sure that there will not be mass job losses. We will assign possible laid off people to new jobs and for those who still have difficulties in getting employment opportunities, the central and local government have financial resources to cover layoffs. The central government has established a 100 billion yuan fund in this respect, and if there is a need we could increase that amount. In the meantime, local governments have to do their own jobs. We hope to make it a win-win process and will strive to strike a proper balance in between. In the process we hope that by cutting overcapacity in those heavy industries, we will bring about a sustained and sound growth in these sectors.