China is facing extreme difficulties in its bid to reduce overcapacity in the steel industry and will provide more funds to help handle layoffs and debts.

The country's state planner said Wednesday that China has pledged to cut steel capacity by around 45 million ton this year, and by 140 million tons by 2020. That's in a bid to tackle a price-sapping annual surplus estimated at around 300 million tons, nearly twice the annual output of the European Union.  

However, China reached less than 30 percent of its annual target in the first half of 2016 as local governments rushed to finalise their closure plans. The National Development and Reform Commission said that the next stage of capacity cuts would be "extremely difficult" as China tries to reach its targets.

The NDRC says it plans to increase financial support for the reduction of steel overcapacity and ensure that unemployment and debt are properly handled.