Mounting debts could derail China plans to cut steel, coal glut

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mage: Workers are seen at Shuangyashan Mine, owned by Longmay Group, in Shuangyashan, Heilongjiang province, in this March 15, 2016 file picture. REUTERS/Brenda Goh/Files

reuters.com - March 22, 2016 - David Stanway

China's campaign to slim down its bloated industries could be derailed by more than $1.5 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 ($15 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.

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