Job losses unfortunate but necessary in China

Unemployment is inherently painful for those losing their jobs, their families and society at large, but for industries weighed down by overcapacity, it is a transition that could not happen soon enough.

In industries such as coal and steel, change is imperative as the current model is unsustainable.

The production of steel is no longer tethered to market demand and now, it is more than double the combined production of the next four leading industries, Xinhua news agency reported.

The result is destructive, prices are in free fall and mills stand quiet as operating losses have left production to a halt.

Employees, in spite of keeping their jobs, may receive meagre salaries but have little assurance that next month's pay packet will arrive.

It is against this background that China expects a wave of job losses in industries struggling with overcapacity, 1.8 million in coal and steel, according to the Ministry of Human Resources and Social Security.

China has promised to let the market play the decisive role in the economy, and the market has spoken. Take financing for example, defaults have scared investors from purchasing bonds from these industries and commercial banks are decreasing exposure.

The consensus is that from a business perspective, these industries are simply no longer viable and it is the market -- rather than the government -- that is the ultimate force behind the closure of coal mines and steel mills.

To brace for the fallout, the government plans to allocate 100 billion yuan ($15.4 billion) over two years to help those who have lost their jobs.

For well-seasoned observers, China has always strived to ensure the harmony and stability of its workforce, especially around the key annual legislative sessions, which convene this week.

The fact that more than one minister has spoken publicly about the expected job losses ahead of these meetings is evidence that the government is not avoiding the subject, but rather tackling it head on.