enterprises owned by central government. For
example, Shenhua Group and China Guodian
Corporation merged into China Energy Investment in 2017.
The third stage was to remove state-owned
coal companies of their social responsibilities,
which were a legacy from the previous round of
reform of state-owned enterprises. To relieve the
burden on coal companies during the economic
downturn, government at all levels began to
remove these responsibilities from coal companies and made great progress in doing so.
The fourth stage was to reduce coal capacity.
Local governments and state-owned coal companies actively shut down old mines and zombie
capacity.
The final stage was to promote mixed ownership. As planned by state-owned enterprise
reform, state-owned coal companies are exploring ways to carry out mixed ownership reform
and are expected to make progress during the
13th Five-Year Plan (2016–20).
6.2.2 Reforms Are Characterised
by Marketisation and More
Administration
Deregulating the coal price, abolishing coal
production permits and requiring companies to
obtain approval to start a coal business are significant steps towards market-based reform. The
coal market’s competitive attributes have been
strengthened. Intermediary coal service organisations are more mature. To meet the need for
market competition, the authorities made regulations more market-oriented. First, laws, regulations, rules, policies and standards were
customised for the coal market. Second, a market
information system was developed to monitor
and analyse the coal market in real time. Third,
plans, guidance and support policies for coal
trading, logistics and reserves were introduced to
marketise the coal industry.
As circulation becomes more market-oriented,
the government is improving its administrative
means to regulate the coal industry, especially
regarding capacity reduction and price stabilisation. At first, in 2016, China put more effort into
capacity reduction. The State Council announced
in January 2016 that capacity reduction should
“first take place in the steel and coal industries”,
and that “coal capacity should be reduced significantly” through “the rule of law and marketisation”. To implement the capacity reduction
plan, the State Council published the Opinions
on Reducing Overcapacity in the Coal Industry
to Achieve Development by Solving the Difficulties in February 2016. After which, support
documents from government departments for
human resources, finance, safety supervision,
land, quality inspection, taxes, and environmental protection were issued. The provinces, cities
and autonomous regions that are major coal and
steel producers also set targets, plans and measures for capacity reduction. Strongly driven by
policies, the coal industry achieved its capacity
reduction objectives ahead of schedule in 2016.
Administration played a leading role in
capacity reduction during the market recovery in
2016. This was enabled by the following five
factors: (i) the macroeconomy reported slower
but stable growth; (ii) market-driven capacity
closures and output reduction during the earlier
downturn reduced supply; (iii) legal measures
forced some outdated capacity to be shut down;
(iv) the government strictly controlled the addition of new capacity; and (v) some production
restrictions adopted in 2016, such as limiting
mine operations to 276 working days a year,
controlled output during the rapid price recovery.
Factor (i) was the foundation. Factors (ii) and
(iii) were essential, but the policies of tightening
supply were more crucial and accelerated the
recovery of the coal market. China’s output of
raw coal in 2016 was 9.4% lower than in the
previous year. The government paid close
attention to price fluctuations and took the necessary measures to stabilise the coal price. Once
coal capacity reduction had delivered results, the
coal price went up. To stabilise the price, the
government actively influenced long-term
agreements with key accounts, under which
coal was traded at a price lower than the market
price, restraining price rises. Finally, the government strengthened the administrative regulatory regime for safety, making it a priority to
regulate the people in charge of coal companies.
Special Report 4: China’s Energy System Revolution
479
example, Shenhua Group and China Guodian
Corporation merged into China Energy Investment in 2017.
The third stage was to remove state-owned
coal companies of their social responsibilities,
which were a legacy from the previous round of
reform of state-owned enterprises. To relieve the
burden on coal companies during the economic
downturn, government at all levels began to
remove these responsibilities from coal companies and made great progress in doing so.
The fourth stage was to reduce coal capacity.
Local governments and state-owned coal companies actively shut down old mines and zombie
capacity.
The final stage was to promote mixed ownership. As planned by state-owned enterprise
reform, state-owned coal companies are exploring ways to carry out mixed ownership reform
and are expected to make progress during the
13th Five-Year Plan (2016–20).
6.2.2 Reforms Are Characterised
by Marketisation and More
Administration
Deregulating the coal price, abolishing coal
production permits and requiring companies to
obtain approval to start a coal business are significant steps towards market-based reform. The
coal market’s competitive attributes have been
strengthened. Intermediary coal service organisations are more mature. To meet the need for
market competition, the authorities made regulations more market-oriented. First, laws, regulations, rules, policies and standards were
customised for the coal market. Second, a market
information system was developed to monitor
and analyse the coal market in real time. Third,
plans, guidance and support policies for coal
trading, logistics and reserves were introduced to
marketise the coal industry.
As circulation becomes more market-oriented,
the government is improving its administrative
means to regulate the coal industry, especially
regarding capacity reduction and price stabilisation. At first, in 2016, China put more effort into
capacity reduction. The State Council announced
in January 2016 that capacity reduction should
“first take place in the steel and coal industries”,
and that “coal capacity should be reduced significantly” through “the rule of law and marketisation”. To implement the capacity reduction
plan, the State Council published the Opinions
on Reducing Overcapacity in the Coal Industry
to Achieve Development by Solving the Difficulties in February 2016. After which, support
documents from government departments for
human resources, finance, safety supervision,
land, quality inspection, taxes, and environmental protection were issued. The provinces, cities
and autonomous regions that are major coal and
steel producers also set targets, plans and measures for capacity reduction. Strongly driven by
policies, the coal industry achieved its capacity
reduction objectives ahead of schedule in 2016.
Administration played a leading role in
capacity reduction during the market recovery in
2016. This was enabled by the following five
factors: (i) the macroeconomy reported slower
but stable growth; (ii) market-driven capacity
closures and output reduction during the earlier
downturn reduced supply; (iii) legal measures
forced some outdated capacity to be shut down;
(iv) the government strictly controlled the addition of new capacity; and (v) some production
restrictions adopted in 2016, such as limiting
mine operations to 276 working days a year,
controlled output during the rapid price recovery.
Factor (i) was the foundation. Factors (ii) and
(iii) were essential, but the policies of tightening
supply were more crucial and accelerated the
recovery of the coal market. China’s output of
raw coal in 2016 was 9.4% lower than in the
previous year. The government paid close
attention to price fluctuations and took the necessary measures to stabilise the coal price. Once
coal capacity reduction had delivered results, the
coal price went up. To stabilise the price, the
government actively influenced long-term
agreements with key accounts, under which
coal was traded at a price lower than the market
price, restraining price rises. Finally, the government strengthened the administrative regulatory regime for safety, making it a priority to
regulate the people in charge of coal companies.
Special Report 4: China’s Energy System Revolution
479