Xinjiang steel collapses

Reuters

Shanghai

As China slims down its bloated steel sector, the western region of Xinjiang is feeling the pain even more than the industry's heartland to the east, threatening efforts to develop a restive area that is home to the mostly Muslim Uighur people.

Over 10 million tonnes of steel production capacity in Xinjiang - enough to produce about a tenth of annual U.S. output - has shut in an area where Beijing has encouraged investment in industries ranging from steel to textiles, in the hope of stimulating growth and curbing unrest by boosting jobs.    

The decline in the fortunes of Xinjiang's steel sector highlights the challenge Chinese policy makers face ensuring job cuts do not strain social cohesion or undermine stability.

China aims to lay off 5-6 million workers over the next two to three years in the country to curb industrial overcapacity and pollution, and will spend nearly 150 billion yuan ($23 billion) to cover layoffs in just the coal and steel sectors, sources told Reuters.