Report plays down overcapacity cut's unemployment impact

China's reduction of industrial overcapacity will only have a slight impact on the country's fairly stable unemployment rate, according to a Chinese investment bank.

A 30-percent production cut in the five industries with the most excessive capacity, namely iron and steel, coal mining, cement making, ship building, aluminum and flat glass, will have to lay off three million employees in the coming two to three years, the China International Capital Corporation estimated in a report published on Monday.

Considering that around two-thirds of laid-off workers during the State-owned Enterprise (SOE) reform in the 1990s were re-employed internally, the potential production cut will in effect leave one million people jobless, or 0.3 percent of all those employed in Chinese cities.

Despite an economic downturn, China's urban registered unemployment rate has remained at around 4 percent, according to the Ministry of Human Resources and Social Security.

China has listed capacity reduction as one of its top priorities in the coming years as the country is pushing forward supply-side reform, which addresses key problems such as excess capacity, a housing overhang and unprofitable "zombie" SOEs. Endi