objectives of building a market-oriented, efficient
and sophisticated coal industry management
system by facilitating revolution through reform
and being problem-oriented. There are six
aspects to consider: (i) handle the relationship
between the long-term target of creating a
sophisticated management system and the shortand medium-term policies of the coal industry,
while protecting the transformation process from
disturbance by an emergency; (ii) the government’s basic regulatory functions in the coal
industry are to avoid price fluctuations and mitigate risk, as the coal sector is of fundamental
importance for jobs and economic growth;
(iii) once a sophisticated coal market system has
been created, control the degree of government
administrative regulation and ensure it does not
cross the boundary between government and
market; (iv) allow the domino effect of reform to
take effect at carefully defined breakthrough
points of the coal market system; (v) redefine the
powers and responsibilities of coal mine safety
management, and improve and standardise coal
company governance; and (vi) use state-owned
capital to optimise the coal industry and improve
the industry’s operations.
6.3.2 Handle the Relationship Between
the Long-Term
Management System and
the Short- and
Medium-Term Policies of
the Coal Industry
Coal industry reform should have long-term
objectives, but the market deals in short- and
medium-term cycles. This makes it difficult to
combine long-term system reform with short- and
medium-term regulation. Supply shortages will
not persist in China’s coal market in the long run.
Moderate oversupply is the target, which is also
conducive to improving the coal market system.
Shifting from supply shortage to moderate oversupply is a long process, during which labour
pains are inevitable. China’s coal market entered
a downward trend in 2012, reaching the bottom of
the cycle in 2015. Markets have the ability to
self-regulate. From 2012 to 2015, with an
imbalance between supply and demand, many
small- and medium-sized coal companies that
were not competitive left the market. In 2015, the
coal industry made large financial losses. If no
other measure other than self-regulation had been
used, more coal companies would have shut
down. To reduce coal capacity, the government
implemented many policies and measures, which
were successful after about a year. Then the coal
market was short of supply. Compared with the
historical price, the coal price in 2016–17 did not
rise sharply, reaching only the historical
mid-range, though this had a great impact on the
bulk raw materials market. Stabilising the coal
price was on the government’s agenda again. The
goal of ensuring safety also involved a conflict
between long-term objectives and short- and
medium-term performance. In the long term, coal
mine safety needs to be managed by law. Only
with a sophisticated legal system could a
long-acting safety management mechanism be
built. But in the short and medium terms, the
government officials in charge could strengthen
the rulebook to improve coal mine safety management and shift more responsibility onto businesses. During the reform of the coal industry, the
central government set long-term reform objectives. However, when the administrative authorities introduced the policies and measures, they
did so in response to short- and medium-term
problems. It is not unusual for short- and
medium-term policies and measures, even emergency policies and measures, to conflict with
long-term reform objectives. Therefore, to
achieve the long-term reform of the coal industry,
the relationship between the long-term coal
management system and short- and medium-term
emergency policies should be properly managed.
Specifically, institutional reform of the coal
industry needs to achieve long-term objectives.
Short and medium-term government regulation is
essential, but it should not be used at the expense
of long-term institutional reform. Although
short-and medium-term regulation that runs
counter to long-term reform can deliver results
quickly, it will generate new bottlenecks that
hinder the long-term reform process.
484
S. Yaodong and A. Gillespie
and sophisticated coal industry management
system by facilitating revolution through reform
and being problem-oriented. There are six
aspects to consider: (i) handle the relationship
between the long-term target of creating a
sophisticated management system and the shortand medium-term policies of the coal industry,
while protecting the transformation process from
disturbance by an emergency; (ii) the government’s basic regulatory functions in the coal
industry are to avoid price fluctuations and mitigate risk, as the coal sector is of fundamental
importance for jobs and economic growth;
(iii) once a sophisticated coal market system has
been created, control the degree of government
administrative regulation and ensure it does not
cross the boundary between government and
market; (iv) allow the domino effect of reform to
take effect at carefully defined breakthrough
points of the coal market system; (v) redefine the
powers and responsibilities of coal mine safety
management, and improve and standardise coal
company governance; and (vi) use state-owned
capital to optimise the coal industry and improve
the industry’s operations.
6.3.2 Handle the Relationship Between
the Long-Term
Management System and
the Short- and
Medium-Term Policies of
the Coal Industry
Coal industry reform should have long-term
objectives, but the market deals in short- and
medium-term cycles. This makes it difficult to
combine long-term system reform with short- and
medium-term regulation. Supply shortages will
not persist in China’s coal market in the long run.
Moderate oversupply is the target, which is also
conducive to improving the coal market system.
Shifting from supply shortage to moderate oversupply is a long process, during which labour
pains are inevitable. China’s coal market entered
a downward trend in 2012, reaching the bottom of
the cycle in 2015. Markets have the ability to
self-regulate. From 2012 to 2015, with an
imbalance between supply and demand, many
small- and medium-sized coal companies that
were not competitive left the market. In 2015, the
coal industry made large financial losses. If no
other measure other than self-regulation had been
used, more coal companies would have shut
down. To reduce coal capacity, the government
implemented many policies and measures, which
were successful after about a year. Then the coal
market was short of supply. Compared with the
historical price, the coal price in 2016–17 did not
rise sharply, reaching only the historical
mid-range, though this had a great impact on the
bulk raw materials market. Stabilising the coal
price was on the government’s agenda again. The
goal of ensuring safety also involved a conflict
between long-term objectives and short- and
medium-term performance. In the long term, coal
mine safety needs to be managed by law. Only
with a sophisticated legal system could a
long-acting safety management mechanism be
built. But in the short and medium terms, the
government officials in charge could strengthen
the rulebook to improve coal mine safety management and shift more responsibility onto businesses. During the reform of the coal industry, the
central government set long-term reform objectives. However, when the administrative authorities introduced the policies and measures, they
did so in response to short- and medium-term
problems. It is not unusual for short- and
medium-term policies and measures, even emergency policies and measures, to conflict with
long-term reform objectives. Therefore, to
achieve the long-term reform of the coal industry,
the relationship between the long-term coal
management system and short- and medium-term
emergency policies should be properly managed.
Specifically, institutional reform of the coal
industry needs to achieve long-term objectives.
Short and medium-term government regulation is
essential, but it should not be used at the expense
of long-term institutional reform. Although
short-and medium-term regulation that runs
counter to long-term reform can deliver results
quickly, it will generate new bottlenecks that
hinder the long-term reform process.
484
S. Yaodong and A. Gillespie