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China is planning to lay off up to six million state workers over the next three years as part of a package to reduce industrial overcapacity and cut down the workforce in bloated 'zombie' industries.

China's 37 million workforce in the state sector accounts for nearly 40 percent of the country's industrial production.

The retrenchment of workers in inefficient state-owned enterprises could hit as many as six million people, contrary to official claims of much smaller layoffs, Reuters exclusively reported.

The report follows confirmation by China's minister for human resources earlier this week that the government will lay off 1.8 million workers in the coal and steel industries.

Earlier this month, state news agency Xinhua reported that China plans to close 4,300 coal mines and remove outdated production capacity of 700 million tonnes and relocate 1 million employees.

The move was in the wake of an economic slowdown, and the dwindling of coal demand in the country over the years.

Overcapacity in China's heavy industries was "completely untethered" from market demand and was wreaking "far-reaching" damage on the global economy, the European Union Chamber of Commerce in China said earlier this month.

The proposal for laying off six million workers is the biggest nationwide retrenchment since the restructuring of state-owned enterprises during 1998-2003, Reuters reported.

The agency said China's ministry of industry did not respond when asked for comment on the layoff reports.

China has been burdened with the problem of industrial overcapacity over the last several years, while layoffs and factory closures remained a highly sensitive issue.

In December, Prime Minister Li Keqiang said several "zombie firms" would soon go under the knife.

Companies that have shut partially but keep staff on the payrolls, especially those in the coal and steel sectors, are referred to as zombie industries.

Over the past five years, China has cut coal production to the tune of 560 million tonnes and closed 7,250 coal mines. China also plans to cut around 150 million tonnes of crude steel capacity and 500 million tonnes of surplus coal production in the next three to five years, Reuters reported.

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