dropped substantially to 0.74% in 2013, then
declined into negative growth for three years
from 2014, before re-entering positive growth in
2017. In the context of the downturn, coal
industry reform has made progress in many
aspects.
China has been using dual coal pricing for a
long time. Coal traded by sellers and buyers
using a market-based pricing mechanism,
through which the price fluctuates in line with
market conditions, is called market coal. Previously, coal producers and thermal power plants
on the state’s list of key enterprises traded coal at
an annual national coal fair price under a planning mechanism called planned coal. During the
golden decade, the price of planned coal was
RMB 200 lower than that of market coal,
resulting in years of coal power combat. China
unified the two prices in 2013, which marketised
the coal market.
An important component of China’s administrative system reform is “administrative
streamlining and decentralisation, the combination of deregulation and regulation, and service
optimisation”. Coal authorities ended the Coal
Production Permit and the Approval Needed to
Found Coal Businesses in 2013. Many local
governments also introduced the reform policies,
delegating approval and improving administrative supervision and management. Administrative supervision and management is becoming
increasingly market-oriented and IT-based.
Government functions focus more and more on
industrial services.
Overcapacity in China’s coal industry
emerged during the 12th Five-Year Plan (2011–
15), reaching a peak in 2015. From November
2011 to January 2016, the Bohai-Rim Steam-Coal
Price Index (BSPI) dropped by 56.51% from
RMB 853/tonne to RMB 371/tonne. According to
data from the National Bureau of Statistics of
China, the profit margin of the coal mining and
washing sectors decreased from 14.06% in May
2011 to 1.76% in December 2015, and to its
lowest point of 1.55% in August 2015. In 2015,
more than 90% of large and medium-sized coal
companies made a loss. China’s coal industry,
characterised by its long history, large size and
huge number of employees, was an important
pillar of the national economy. A fast and substantial downturn in the industry brings financial
and social risks and threatens the overall stability
of the Chinese economy. The coal industry
therefore became a key sector for China’s
supply-side structural reform under the new normal of slower economic growth. The structural
reform of the coal industry is focused on reducing
capacity, optimising supply and achieving the
reform objectives of reducing inefficient supply
and increasing efficient supply. The State Council
issued the Opinions on Reducing Overcapacity in
the Coal Industry to Achieve Development by
Solving the Difficulties in February 2016, which
set out the objective of reducing capacity in the
coal industry. China cut coal capacity by 290
million tonnes in 2016, exceeding the target of
250 million tonnes. China will strive to meet the
capacity reduction target of 150 million tonnes in
2017.
Coal mine safety management has always
been an important area of coal industry reform.
Since 2010, reform has focused on shutting down
or reorganising small coal mines, reforming
safety management and increasing safety
investment. First, small coal mines that did not
meet safety requirements were shut down. More
than 3,000 small coal mines, each with an annual
output of less than 300,000 tonnes, were closed
by the end of 2015. The second measure was to
merge small coal mines that met safety requirements with large companies. Shanxi Province
implemented the plan between 2009 and 2012,
shutting down 1,545 mines. Other major coal
producing provinces also merged large companies with small coal mines. Henan merged and
restructured 466 small coal mines in 2010. Hebei
began to regulate small coal mines in 2011,
shutting down 237 during the 12th Five-Year
Plan (2011–15) through merger, restructuring
and integration of resources. Shandong launched
a programme to merge and restructure small coal
mines in 2012; by 2015 there were 52 fewer coal
mines than in 2010. The third measure was to
increase investment in safety. This became part
of management procedures and was well promoted and well implemented. Reform was based
Special Report 4: China’s Energy System Revolution
477
declined into negative growth for three years
from 2014, before re-entering positive growth in
2017. In the context of the downturn, coal
industry reform has made progress in many
aspects.
China has been using dual coal pricing for a
long time. Coal traded by sellers and buyers
using a market-based pricing mechanism,
through which the price fluctuates in line with
market conditions, is called market coal. Previously, coal producers and thermal power plants
on the state’s list of key enterprises traded coal at
an annual national coal fair price under a planning mechanism called planned coal. During the
golden decade, the price of planned coal was
RMB 200 lower than that of market coal,
resulting in years of coal power combat. China
unified the two prices in 2013, which marketised
the coal market.
An important component of China’s administrative system reform is “administrative
streamlining and decentralisation, the combination of deregulation and regulation, and service
optimisation”. Coal authorities ended the Coal
Production Permit and the Approval Needed to
Found Coal Businesses in 2013. Many local
governments also introduced the reform policies,
delegating approval and improving administrative supervision and management. Administrative supervision and management is becoming
increasingly market-oriented and IT-based.
Government functions focus more and more on
industrial services.
Overcapacity in China’s coal industry
emerged during the 12th Five-Year Plan (2011–
15), reaching a peak in 2015. From November
2011 to January 2016, the Bohai-Rim Steam-Coal
Price Index (BSPI) dropped by 56.51% from
RMB 853/tonne to RMB 371/tonne. According to
data from the National Bureau of Statistics of
China, the profit margin of the coal mining and
washing sectors decreased from 14.06% in May
2011 to 1.76% in December 2015, and to its
lowest point of 1.55% in August 2015. In 2015,
more than 90% of large and medium-sized coal
companies made a loss. China’s coal industry,
characterised by its long history, large size and
huge number of employees, was an important
pillar of the national economy. A fast and substantial downturn in the industry brings financial
and social risks and threatens the overall stability
of the Chinese economy. The coal industry
therefore became a key sector for China’s
supply-side structural reform under the new normal of slower economic growth. The structural
reform of the coal industry is focused on reducing
capacity, optimising supply and achieving the
reform objectives of reducing inefficient supply
and increasing efficient supply. The State Council
issued the Opinions on Reducing Overcapacity in
the Coal Industry to Achieve Development by
Solving the Difficulties in February 2016, which
set out the objective of reducing capacity in the
coal industry. China cut coal capacity by 290
million tonnes in 2016, exceeding the target of
250 million tonnes. China will strive to meet the
capacity reduction target of 150 million tonnes in
2017.
Coal mine safety management has always
been an important area of coal industry reform.
Since 2010, reform has focused on shutting down
or reorganising small coal mines, reforming
safety management and increasing safety
investment. First, small coal mines that did not
meet safety requirements were shut down. More
than 3,000 small coal mines, each with an annual
output of less than 300,000 tonnes, were closed
by the end of 2015. The second measure was to
merge small coal mines that met safety requirements with large companies. Shanxi Province
implemented the plan between 2009 and 2012,
shutting down 1,545 mines. Other major coal
producing provinces also merged large companies with small coal mines. Henan merged and
restructured 466 small coal mines in 2010. Hebei
began to regulate small coal mines in 2011,
shutting down 237 during the 12th Five-Year
Plan (2011–15) through merger, restructuring
and integration of resources. Shandong launched
a programme to merge and restructure small coal
mines in 2012; by 2015 there were 52 fewer coal
mines than in 2010. The third measure was to
increase investment in safety. This became part
of management procedures and was well promoted and well implemented. Reform was based
Special Report 4: China’s Energy System Revolution
477