In case of enterprises that are likely to close down, they should terminate the labor contracts according to the law with employees who are close to the retirement age and ensure the resettlement funds are directed to them. As far as the workers are concerned, they could choose to get one-time monetary compensation, or receive basic living allowance from government-appointed organizations till they reach the retirement age. During this period, their basic living allowance, and pension and medical insurance premiums have to be paid by the government-appointed organizations using the enterprises' funds earmarked for the purpose.

Since enterprises play a big role in reducing overcapacity, they should offer monetary compensation to laid-off workers, and pay their due salaries and social insurance premiums as well.

Moreover, local governments should improve their tax and financial policies to help enterprises reduce overcapacity according to the central government's guideline. The local authorities, for example, could offer rewards to industries that are under huge pressure to resettle laid-off workers, in a bid to encourage enterprises to accomplish the task. And local governments are responsible for the resettlement of laid-off workers in respect of social security. The authority should encourage employees to join social insurance project, make sure they enjoy the benefit of social insurance including unemployment insurance and re-employment supportive policies, and guarantee the basic living of laid-off workers with financial difficulties.

The central government, too, has responsibilities to fulfill. It should establish special funds, for instance, to guide, support and reward those enterprises that reduce overcapacity through mergers and acquisitions, debt restructuring and bankruptcy liquidation.

The resettlement funds for laid-off workers are aimed at protecting workers' vital interests, and helping expedite reform and industrial restructuring. Therefore, the responsibilities of enterprises, the central government and local governments should be clearly demarcated, in order to prevent one party from passing the buck to another, motivate all parties involved to deliver results and raise funds for the resettlement of laid-off workers.

The author is deputy director of Social Security Research Institute, Ministry of Human Resources and Social Security.