Xinhua Insight: China's painful transition to slower but sustainable growth (1)

Wang Dejian never expected a layoff like this.

The former trade union official at Qitaihe Mining Group in northeast China's Heilongjiang Province joined the company 12 years ago, attracted by stable career prospects and the good reputation of state-owned enterprises.

But Wang, along with his wife and 5,000 colleagues, was forced out in January as part of the company's efforts to cut costs amid a demand slump.

COAL QUANDARY

Heilongjiang Longmay Mining Holding Group Co. Ltd, parent company of Wang's former employer, plans to cut a quarter of its total workforce, or 50,000 jobs, in the next two to three years.

"Longmay has suffered a total loss of 13.54 billion yuan (2.07 billion U.S. dollars) since 2012 due to overcapacity, falling prices and heavy personnel burden," said Sun Chengkun, general manager of Longmay, the largest coal mine in northeast China.

Longmay's sales dropped by 2.64 million tonnes and revenues fell by 14.53 billion yuan in 2015 over those in 2011. The company has 216,000 current employees on its payroll and 198,000 retired workers, meaning every 12 employees have to support 11 retirees. This is a typical burden for traditional state-owned enterprises in China.

Longmay is one of many struggling coal and steel companies in China, which has witnessed its slowest economic growth in 25 years. China's economy grew at 6.9 percent in 2015, a pace that would be the envy of many developed nations, but was the country's most sluggish expansion since 1990.

In early March, Chinese Premier Li Keqiang announced in a government work report that this year's GDP growth target is between 6.5 and 7 percent. It is the first time in two decades that China has set a range for its growth target, rather than a specific number, and the change marks a shift to a "new normal" of slower yet greener and more sustainable growth.

Li vowed to address capacity glut in steel, coal and other heavy industries as well as strict expansion control.

China plans to lay off roughly 1.8 million workers from the coal and steel industries to restructure the economy.

"The plight of the coal and steel industries makes this the best time for restructuring and improving efficiency," said Li Jin, a researcher with the China Enterprises Research Institute.

Overcapacity industries not only use a lot of resources but also have potential credit risks, said Wei Fengchun, general manager of the macro strategy department of Bosera Funds. "The government should be decisive in cutting overcapacity."

Wang, 36, and his wife were hired at a state-owned farm earning a monthly pre-tax salary of 1,800 yuan each, hardly enough for them to make ends meet: 2,300 yuan goes to the mortgage on their apartment, and 800 yuan for their son's monthly kindergarten fees.

Wang said his best years were from 2009 to 2011, when China introduced a 4-trillion-yuan stimulus package to withstand the global financial crisis. He earned more than 4,000 yuan per month then.

"I will look for a medical job after settling down," said Wang, a graduate of Harbin Medical University.

Companies are also looking for a way forward.

Following negotiations with local governments, Longmay is shedding its water, power, heating and property management responsibilities.

It is also transferring administration of dozens of affiliated mine hospitals to public hospitals to cut costs.

One of Longmay's coal mines has set up a new firm to employ more than 1,600 redundant workers.

Some 20 former Longmay administrative staff were hired by a private mine in Mudanjiang City. A power plant in Hegang City employed 80 others. More than 20 plumbers and electricians joined a middle school renovation project in the provincial capital of Harbin.

Looking for jobs in the market is the only way to go, said Tian Chunguang, a manager at the new firm.

To cushion the effect of job losses, the central government has pledged 100 billion yuan over two years to help laid-off workers find new jobs.

Despite the slowdown, China still created more than 13 million jobs and increased per capita disposable income by 7.4 percent in 2015, underlining the strong potential and resiliency of its economy.

It aims to offer at least 10 million new urban jobs and keep the registered urban unemployment rate under 4.5 percent this year.

The rapidly growing service industry is expected to pick up the slack in job creation. The service sector accounted for 50.5 percent of the country's GDP last year, the first time the number has been above half. (Mo