China is set to combine more big state-owned enterprises (SOEs) as part of a sweeping plan to cut industrial overcapacity and promote growth and employment opportunities in other sectors of the nation's economy, a senior regulator said on Saturday.

The Chinese government is trying to reduce the number of state-managed enterprises and encourage private investments and job creation in state-dominated sectors such as aerospace, nuclear power, high-speed rail, smart grid technology and renewable energy.

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The country's policymakers must balance various interests as they restructure the national economy, especially those of state employees, Xiao Yaqing, chairman of China's State-Owned Assets and Supervision and Administration Commission, said at a press briefing held on the sidelines of China's annual legislative session in Beijing.

"We are in the business of growing bigger and better," Xiao said, adding that the planned mergers will make the country's state-run companies stronger even as they eliminate duplication and excess production.

The reform plans have sparked fears of massive unemployment and job losses akin to the 1990s, when about 28 million Chinese workers found themselves jobless and redundant.stat

"The situation in the 1990s was completely different," Xiao said.  "The foundations we have now are much stronger than before."

Chinese officials estimate that some 1.8 million workers in the country's coal and steel sectors are likely to lose their jobs as the country works to reduce overcapacity and shut down inefficient SOEs. 

The Chinese government has set a two-year deadline for money-losing state-run companies to improve their performance.  Bloomberg meanwhile has reported that China's three biggest airlines are likely to see mergers in the near future. 

"Protecting the interests of workers is an important aspect of the next stage of reforms, and there will be more mergers and restructurings, and as few bankruptcies as possible," Xiao said.

TagsChina employment, state-owned-enterprises, chinese economic slowdown, China State-Owned Companies Reform