China reallocates billions of dollars

October 18th, 2016

China has begun to make plans for recovery after the Shanghai stock exchange bubble burst last summer.

In recent years, China has faced major problems with crowding. Regarding employment in various sectors, this issue has spiraled into the problem of Zombie companies, which are state-run businesses that are no longer necessary or functioning, but keep employees on the book in order to avoid massive layoffs, Bloomberg reports.

China has begun to address these issues following a meeting of top economic officials this past month. The government has made plans to invest 1 trillion Yuan, or $150 billion into new public and private sector projects.

The specifics of these projects have not yet been announced. However, a great deal of these funds are expected to go towards establishing an indigenous semiconductor industry and bolstering the nation’s service industry.

Last year, those government projects contributed over 50 percent of China’s overall GDP, according to Fortune.

While China is often thought as a major producer of high-end technology, a vast majority of the semiconductors and microchips that go into Chinese products are foreign imports.

The Economist reports that by 2030, China hopes to be caught up with top global firms regarding production in this industry.  While expanding the tech industry and investing in new domestic projects are expected to be positives for the Chinese economy, not all Chinese citizens are pleased with the plan.

While $150 billion has been invested into new projects, over 1.8 million workers are expected to be laid off as a direct result of the scheme, according to Business Insider.

A substantial majority of these workers are from the over-crowded coal and steel industries.  Until recent years, these industries would take on more workers than necessary in order to shift the nation’s unemployment figures, making them more manageable.

Segments of these industries became Zombie companies when the Chinese economy dipped last year.

While millions of Chinese will lose their jobs in traditional sectors, supporters of the economic plan insist that if China maintains a focus on education, the unemployment rate will quickly recover with individuals taking new jobs in the recently established technology and service sectors.

Editor’s Note: Information from Fortune, Bloomberg, The Economist, and Business Insider was used in this report.