China is planning to reorganize and merge the largest state-owned companies in the country in order to cut down overcapacity in the $18 trillion sector without seeing massive layoffs, a senior official revealed.

According to Xiao Yaqing, the chairman of the State-Owned Assets Supervision and Administration Commission, the agency will uphold the rights of the workers as it attempts to balance competing interests across China's reforming state sector. He stressed that China will not be experiencing massive layoffs like the late 1990s under then-Prime Minister Zhu Rongji, where about 40 million workers lost their jobs and around 60,000 firms were shut down due to restructuring.  He noted that instead, big state-owned companies will be made stronger, while duplication will be eradicated.

Like Us on Facebook

Xiao complemented the progress made so far in how state enterprises are being reorganized in sectors like banking, telecommunications and oil. The Chinese government has successfully combined 12 large state firms into six entities involved in various fields including energy and transportation. Xiao said that his agency would continue to push more mergers and acquisitions in the state sector, while putting less emphasis on bankruptcies.

In 2015, the number of enterprises administered by the Assets Supervision and Administration Commission plummeted from 112 to 106 folloing the high-profile consolidation of China Ocean Shipping Group and China Shipping Group together with two other train manufacturers.

Experts say one problem authorities are likey to face in the restructuring of China's economy is that skills of workers from the old industry may not be applicable to the new economy, for instance, the in coal and steel sector.

Meanwhile, China's economic slowdown is still causing panic as its growth continues to move in a downward trend.

Tagslayoffs, china economic growth, bankruptcies, merging