By Zhang Yanlong
Nation, page 13
Issue 527, July 11, 2011
Translated by Zhu Na
Original article [Chinese] 

Following in the footsteps of the neighboring provinces of Shanxi (山西) and Henan, the coal-rich province of Shaanxi (陕西) has initiated reforms aimed at consolidating the hundreds of small and medium-sized coal mines operating in the region. Over the past four months, a rash of mergers has seen the number of coal mining companies operating in the province drop from 522 down to 120.

 The EO has learned that the over the next three years, the Shaanxi provincial government aims to establish two large coal mining groups with annual output of over 100 million tons in addition to five larger companies that are able to produce around 10 million tons of coal a year.

However, unlike mining sector reforms in other areas of the country, Shaanxi has made an effort to avoid large state-owned players simply coming in and picking off the smaller miners at bargain prices.

Instead, smaller local businesses have been encouraged to merge in order to meet the new government requirements in relation to the minimum size of coal mining companies.

 As the owner of one coal mine in Shenmu County (神木县) told the EO, “If our mines are not big enough, the government will cut off the power and we’ll close down. So we took the initiative and approached friends and neighboring coal mine owners with the proposal of uniting together to form a larger company in order to meet government’s size requirements.”

 Shaanxi’s leaders have labeled the reform as a “must-do task,” with the governor of the province Zhao Zhengyong (赵正永) remarking at a recent meeting that “we’ve made up our minds to close down some small mines, because even though it may temporarily slow down the development of the coal mine industry, in the long run, the consolidation of resources and closure of small mines will lift the fiscal revenue of cities and counties.”

 In putting together the reform package, the provincial government didn’t adopt a one-size-fits-all approach in regards to the restrictions it put on the minimum size of mining companies. Although most of the province’s coal mines are located in northern Shaanxi, there are still quite number of small- and medium-sized coal mines in the south and in the region of Guanzhong (关中). 

“If we were to apply the same high standard to the whole province, then most of the small- and medium-sized coal mines in both Guanzhong and southern Shaanxi would face closure. This would lead to problems for the local thermal power plant in sourcing coal, as Shaanxi’s transportation system is still weak,” a government source told the EO.

 In the end, the province adopted a flexible package of reforms that took into account regional differences. For example, in Yulin (榆林), a city in northern Shaanxi, the new limit imposed by the government says that annual output must exceed 3 million tons, while the standards for mines located in the Guanzhong region is significantly less.

 After Shanxi and Inner Mongolia, Shaanxi is the third largest coal-producing province in the country, digging up 355 million tons of the vital resource in 2010.

 Links and Sources
The Economic Observer: Consolidating China\'s Coal Industry: Nation to Follow Shanxi\'s Lead
The Economic Observer: Cleaning Up Shanxi\'s Coal Mines
The Economic Observer: Henan Province to Nationalize Coal Mines
The Economic Observer: Headline - 1611 Coal Mines Shut Down in First Three Quarters of 2010

This article was edited by Paul Pennay