China is planning to layoff millions of workers from 'zombie enterprises' over the next two to three years to reduce industrial overcapacity and pollution levels. The Chinese government has decided to spend 100 billion Yuan ($15.27 billion) on relocating retrenched workers.

Though the target of layoff has not been officially announced, some sources say it would be five million, while some estimate six million. However, the boldest measure by the Chinese government will see retrenchment of 5-6 million workers from industries with overcapacity. 

CNBC reports that the restructuring plan at state-owned enterprises during 1998-2003 resulted in 28 million redundancies and it incurred a cost of  73.1 billion Yuan ($11.2 billion) for the government in resettlement funds. The Ministry of Industry didn't make any announcement in this regard.

Yin Weimin, Minister for Human Resources and Social Security, on Monday said the government was anticipating to lay off 1.8 million workers in coal and steel sectors. But the minister didn't mention any time frame for retrenchment.

The minister's statement about the retrenchment was the first official statement about the layoff. The Chinese government for the first time mentioned its plan to deal with overcapacity and reducing pollution levels. Yin added "This involves the resettlement of a total of 1.8 million workers. This task will be very difficult, but we are still very confident."

About 1.3 million workers will lose jobs in the coal sector and 500,000 from the steel sector. The combined headcount in the China's coal and steel industries stands about 12 million workers. The Chinese government that has earmarked 100 billion Yuan ($15.27 billion) will spent it over two years in relocating workers, according to Reuters.

The counrtry is keen on slashing overcapacity in seven sectors including cement, glass making and shipbuilding. However, the solar power industry, though it's oversupplied, may be spared out from the list of restructuring as the government considers it to be growth potential.

The latest major decision by the Chinese government is creating tremors in the country. Local governments are expressing concerns over social and economic impact of the massive layoff. It's feared that rise in bankruptcies and unemployment will worsen the economic and social climate in several regions, as reported by Mail Online Wires.

China's Vice Finance Minister Zhu Guangyao quoted Premier Li Keqiang as telling US Treasury Secretary Jack Lew that the fund would mostly focus on relocating workers from the steel and coal sectors.