China's Ministry of Finance announced Thursday it has allocated 27.6 billion yuan (4.2 billion U.S. dollars) from the central budget to cut steel and coal capacity.
The funds will be mainly used to resettle workers made redundant, according to the ministry website.
Overcapacity in some industries, especially steel and coal, has become a major drag on China's growth in recent years, and the government is at pains to slim down the sectors.
Crude steel production capacity will be cut by 100 to 150 million tonnes in the coming five years, while coal production will be reduced by "a relatively large amount," according to earlier government plans.
This would translate into hefty job losses. According to preliminary forecasts, the coal and steel sectors will see combined laid-offs totaling 1.8 million.