China is expected to lay off 1.8 million workers from its coal and steel sector to lessen industrial overcapacity, but no definite timeframe has been given, an official from the Ministry of Human Resources and Social Security revealed on Monday.

The initiative will unload excess capacity and eradicate so-called zombie enterprises (struggling firms being kept alive as local governments are afraid of job losses).

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The spokesman of the Ministry of Human Resources and Social Security Yin Weimin revealed that cuts in capacity will affect about 1.3 million workers from the coal sector and half a million from the steel sector. It is the first time a senior government official has announced a large number of job losses as the country deals with industrial overcapacity. Yin, however, stressed that he is confident the government will able to resettle the 1.8 million workers in spite of the plunging Chinese economy.

The central government will reportedly allocate 100 billion yuan ($15.27 billion budget) in the next two years to help resettle workers who will be affected by the layoff. Vice Finance Minister Zhu Guangyao cited Premier Li Keqiang telling US Treasury Secretary Jack Lew on Monday that the budget is mainly focused on the steel and coal sectors.

The move is consistent with China's aim to eradicate about 500 million tonnes of coal production over the next three to five years and suspend approvals of all pending projects.

In spite of the economic slowdown, there have been no reported massive layoffs amid the global financial crisis. By the end of 2015, the survey-based unemployment rate of the National Bureau of Statistics stayed at around 5.01 percent. Meanwhile, the Ministry of Human Resources and Social Security's urban jobless rate was at 4.05 percent. However, many experts believe that the country's few official unemployment readings underestimate the number of jobless.

Tagschina, economic slowdown, global financial crisis, Layoff, coal and steel sectors, industrial overcapacity