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China's coal industry at a crossroads Kaneko, Sawa

Abstract

China's coal industry stands on the cusp of further industrial restructuring. In order to make its industry more financially sustainable and to challenge the giant global corporations of the advanced economies, small-scale coal mining, particularly township-and-village owned coal mines (TVCMs) have been forced to close. Many have been replaced with more modern and large-scale operations. TVCMs have made significant contributions to the growth of China's economy in terms of coal provision since the economic reforms of the late 1970s. Moreover, they yielded numerous socio-economic benefits including absorbing surplus labour and combating rural poverty, all of which are priorities of the Chinese government. Despite recognizing the socio-economic importance of TVCMs, the Chinese government has started to implement the widespread closure of TVCMs since 1998. The Chinese government legitimizes the closure policy in terms of the problems distinctive to TVCMs including low safety standards and environmental damage. Many observers, however, construe the issue in the context of competition with the state-owned (SOE) coal mines. It is true that the poor safety measures of TVCMs contributed to the high death toll of China's coal industry and that many TVCMs do not care about environmental protection. Moreover, intensifying competition with TVCMs led to lower coal prices and in turn to further financial problems for SOE coal mines. Yet these arguments are not enough to fully capture all aspects of the Chinese government's motivation. This paper alternatively argues that closing down TVCMs and replacing capacity with large-scale SOE coal mines is the result of deliberate calculation responding to internal and external pressures amid the increasing market orientation of the country. Both, internal pressure to maintain state power through the SOEs in the energy sector, and external pressure to accommodate the intensifying global competition in the energy market triggered the demise of TVCMs; secondly, these forces are pushing further industrial restructuring through the enforced consolidation of mining enterprises into large state conglomerates.

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