Collapse of industrial forcing China to collective redundancies – Reuters Germany

Shanghai China is facing its most mass layoffs for nearly two decades.

Because of the weakening economy, the government wants According to insiders emphasize five to six million jobs in the industry. This therefore fall within the next two to three years in so-called zombie companies away, the long loss write and often produce in excess of requirements, said two people familiar with the process told Reuters. Just recently, the communist state had announced in the coal and steel industries to fire 1.8 million people and thus 15 percent of employees. Data show on Tuesday that the industry is not shrinking as much as since November 2011 and also lose the service momentum. therefore

The financial markets expect additional stimulus measures by the government and central bank. The second largest after the United States economy in the world in 2015 was so weak growth not seen for a quarter century. Recently there had been listed on the China repeated turbulence, mainly for fear of economic slowdown.

The planned redundancies are linked to the stringent approach of the authorities towards overcapacity and pollution, as the two insider said. Between 1998 and 2003 the conversion of state enterprises had led to 28 million layoffs that cushioned the central government with ten billion euros. The Deputy Prime Minister Ma Kai was quoted on Tuesday as saying that China will deal appropriately with the new layoffs in the industry.

“ZOMBIE COMPANY” SHALL “knife”

Prime Minister Li Keqiang has stressed in December, “zombie companies” would soon “come under the knife.” On the brink thus probably are companies in industries that produce excessively and those who do not comply with the standards for energy consumption, environmental protection, quality and safety. A schedule for the elimination of 1.8 million jobs in the coal and steel sectors not call the authorities. “This is a very difficult task,” the competent Minister Yin Weimin said only.

The government wants the rebuild and modernize economy and reduce dependence on exports. But it takes less growth in purchasing. “Many industries that have been supported in the past, is no longer consistent with the strategic focus of the State,” said Chief Economist Ludovic Subran by credit insurer Euler Hermes ( ELER.PA ). “The government has to be no longer afraid to go bankrupt this.”

China is also working to the classification as a market economy by the EU. The World Trade Organization (WTO) had ruled in the admission of China 2001 that the prices there are not by supply and demand, but government guidelines. If the EU could impose punitive tariffs to shield the domestic market from cheap imports from China. Some experts believe that China wants to meet with the reduction of excess capacity of the EU and so bring about a change in the anti-dumping law. A study of 30 European industry associations came recently to the conclusion that the EU the loss of 1.7 million to 3.5 million placing risked in a de facto ineffectiveness of the existing anti-dumping law in the next three to five years.

INDUSTRIAL WEAKNESS IS ALSO TRUE SERVICE

China’s industry is weakening for months. The official purchasing managers’ index fell in February to 49.0 points after 49.4 points in the previous month. Thus removed the barometer further away from the growth threshold of 50 points. It was the seventh consecutive decline. The private Caixin / Markit index fell more than expected – namely by 0.4 to 48.0 points. The service continued to rise, but I lost noticeable momentum. Here, the barometer fell by 0.8 to 52.7 meters, which is the slowest pace since 2008, the height of the global financial crisis.

“The Stumbling of the manufacturing industry leads to a snowball effect and the downward spiral tears the suppliers with” warned Euler Hermes expert Subran. “In terms of economic skid marks from the Middle Kingdom is the latest since now to speak of an elevated alert,” added China expert Frederik Kunze by NordLB. Zhou Hao expected by Commerzbank that China’s central bank cut interest rates in the first quarter by a quarter percentage point and the banks can be more air for lending. In upcoming National People’s Congress, the annual meeting of the Parliament, the growth forecast could be lowered in 2016 to 6.5 percent, Kunze said. So far, the government expects a range from 6.5 to 7.0 percent, after 6.9 percent in 2015.