End excess capacity and boost quality, Li tells SOEs

Premier Li Keqiang urged State-owned enterprises to remove excess production capacity and increase quality during a visit to Hubei province on Monday.

Li appointed the Wuhan Iron & Steel Group Co as a pilot SOE to reduce excess capacity and transfer redundant workers to other posts with financial and policy support from the central and local governments.

The company has four subsidiaries with an annual production capacity of nearly 40 million metric tons of iron and steel, ranking fourth around the world.

"Reform is the fundamental way for SOEs to grow and prosper. But when cutting excess capacity, superfluous workers must be transferred to other jobs instead of being laid off," Li told the company.

SOEs administered by the central government in the coal, iron and steel sectors are due to cut 10 percent of production capacity this year, according to an executive meeting of the State Council presided over by Li on May 18.

Wuhan Iron & Steel had 51,000 employees by the end of last month, 72.8 percent of the total in July last year. The company subsidizes these workers each month.

Last year, the company spent 10 billion yuan ($1.53 billion) to cover expenses for employees, incurring a loss of more than 10 billion yuan, according to the company's report. Wuhan Iron & Steel will further cut the number of employees to about 30,000, which is estimated to cost it 5 billion yuan.

Li said the central government will support the SOE's restructuring, which will receive preferential policies and financial support as a pilot project.

A total of 100 billion yuan has been allocated to remove excess capacity and transfer workers who are not needed in such enterprises.

Zhang Chunxiao, a researcher at the Chinese Academy of Governance, said China's industrial chains can now accommodate workers who are transferred from industries that are plagued by excess capacity amid economic restructuring.

Li also encouraged manufacturers to further improve efficiency and increase quality with a "craftsman's spirit" when he visited the Dongfeng Commercial Vehicle Co in Shiyan, Hubei province, which produces 80,000 heavy trucks annually.

Zhang said the "craftsman's spirit" integrates labor and technologies, which will boost products made in China from a low-end industrial structure to a high-end one.

Li also saw innovations by high-tech companies at the Optics Valley Exhibition Center in the Donghu Lake High-technology Zone.