Jiao Nianmin, secretary-general of the China Sugar Association, said the restructure lacks a total of 1.8 billion yuan (US$217 million) for settlement of the layoffs.

To close down the small and bad-performing sugar refineries, 137,000 employees will be laid off, whose payout settlement totals 2.8 billion yuan (US$338 million).

The sugar industry saw poor results over the past four years, with cumulative losses approaching 10 billion yuan (US$1.2 billion), according to statistics from the State Economic and Trade Commission (SETC).

"The industry's bleak situation was prompted by redundant production, blind expansion and poor management,'' Jiao noted.

To reverse the situation, the SETC decided to close chronically debt-ridden and uncompetitive sugar refineries.

Last year China shut down 149 sugar refineries. The efforts helped reduce the 1999-2000 sugar production by 2.01 million tons.

The SETC aimed to close another 152 small sugar refineries and help the industry score a benefit of 1 billion yuan (US$120 million) this year.

Lin Feng, a manager of Nanning Sugar Co Ltd, a listed company merged from five sugar plants, said it is more difficult to close down a sugar refinery than create a merger because it requires more funds.

"Under the current situation, it is dependent on related governments to urge the local governments to finalize their promises of giving fiscal support,'' Lin said.

Jiao said besides the support from the local governments, the restructuring will ask for more help from the central government because many of the small sugar plants are located in provinces with poor economy.

"In addition to shutting down more plants, we also should prevent the already closed small refineries from resuming production,'' Jiao said.

This year's output dropped to 620 million tons because of natural disasters and restructuring, he said.

The strained market supply pushed the sugar price higher, even to 4,300 yuan (US$518) per ton, compared with the regular 3,000 yuan (US$360).

Tempted by the price sweetening, some chronic money-losing sugar firms or small businesses with backward technology which have already been shut down, rushed to resume production.

"The trend will thwart the country's efforts to revitalize the industry,'' he said.

To quench the overheating of sugar prices, the country moved more than 1 million tons of its State reserves to the market.

"The restructuring is bitter, but the industry will taste sweet in the future,'' Jiao said.

(China Daily 08/07/2001)