China's Worker Bailout Fund on Hold?

AAP: Mounting debts could derail China's plans
China's campaign to slim down its bloated industries could be derailed by more than $US1.5 trillion ($A1.97 trillion) of debt in its steel, coal, cement and non-ferrous metal sectors, which threatens to overwhelm local banks.

Tackling industrial overcapacity has become a priority for Beijing to make its slowing economy more efficient and address a supply glut that has hammered coal and steel prices.

China is providing more than 100 billion yuan ($A20.2 billion) in the next two years to handle layoffs from coal and steel, but that will only be made available once debts have been settled.

...China's statistics bureau puts coal and steel debts alone at eight trillion yuan, of which about a third is bank debt.

If 20 per cent of that were to go bad in 2016, which industry analysts say is not unrealistic, it would raise Chinese banks' non-performing loans by nearly half.

Bankers say city and regional banks set up by party or provincial government officials are most exposed, and that official NPLs, which already doubled in 2015, underestimate the scale of their problem lending.

"China needs to set up a new organisation, a special bank just to take over these debts in order to avoid the local banks going bankrupt," said steel industry consultant Xu Zhongbo.

..."To cut capacity we cannot just shout slogans and issue targets - we must have a realistic and effective mechanism," said Wang at Huaibei Mining Group.

He said it was unreasonable to expect local governments to take the initiative in closing zombie coal firms, given the contribution coal makes to local gross domestic product, employment and government revenue.
I assumed the worker bailout funds were designed to shutter the firms and move the debt restructuring process along, but not it appears the layoffs are coming later in the process. The longer it takes, the more bad debt will pile up...

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