Accidents in township-run mines have increased sharply.	China relies on coal for 70 percent of her energy needs.	Coke and float coal produced in Shanxi’s Jiexiu City awaiting shipment.

A seemingly insatiable demand for energy has sparked off a global coal mining “fever.” Yet Shanxi Province, the largest coal-producing province in China, has guaranteed that in the coming five years it will not expand the production capacity of its coal mines, nor will it easily approve investment in new coal mines. This is a surprising commitment, in view of the relevant government department having stated that China’s coal mining industry profits are expected to maintain their currently high level in the coming five years.

Bearing in mind the exorbitant price of oil on the international market, and China’s inadequate oil reserves, coal is of paramount importance to the country. Its multiple uses range from powering the manufacturing industry to operating air-conditioning. China uses coal to meet 70 percent of its energy demands, and coal from Shanxi fills 26 percent of this need, according to an analysis report published by the Chinese coal industry.

Resource Exhaustion Imminent

Visitors to Shanxi see gray skies and a layer of coal dust on every visible surface, horizontal and vertical. Long-term mining of coal seams under streets and houses has caused large areas of subsidence at the rate of 5,000 hectares annually, 40 percent of it on arable land. This is one example of how China’s economic vigor is inhibited by limited resources.

Shanxi’s natural resources are shrinking at an alarming rate and, if the current scale and rate of mining continue, its mineral deposits can last no more than 70 years, according to a recent survey report.

The whole mining process involves enormous waste: One ton of coal production uses two tons of coal reserves and 2.48 tons of water in state-owned coal mines. Calculations made in 2002 indicate that losses caused by resource waste, environmental pollution, ecological damage and subsidence as a direct result of mining total RMB 30 billion, or RMB 70 of invisible losses per ton of coal produced.

Despite Shanxi local government having strengthened its supervision and management of resource waste, depleted water resources and areas of arable land have seriously hampered development in other sectors. Prospects for Shanxi and other provinces whose economies are based on coal are bleak, as 80 percent of their coal mines are either mature or in decline, according to statistics provided by the China Mining Association.

The need for increased environmental protection and work safety and efficiency has prompted the Chinese government to look for alternatives to economic growth at the expense of already depleted resources.

What most concerns Shanxi officials is work safety in coal mines. Wang Shouzhen, chief of the Coal Industry Bureau of Shanxi Province and a deputy to the National People’s Congress, explains, “The number of deaths per million tons of coal is the accepted yardstick for work safety in coal mines. That in Shanxi’s state-owned coal mines dropped from 1.85 per million tons of coal in 2000 to 0.9 in 2005, but the deaths in township-run coal mines have risen sharply.”

At the fourth session of the 10th National People’s Congress in March 2006, Shanxi Provincial Governor Yu Youjun revealed that Shanxi closed down 4,876 illegal coal mines in September 2005, and that in January 2006 it closed down a further 1,400 whose production capacity was less than 90,000 tons. The provincial government also ordered technical upgrading in medium-sized coal mines – those with an annual output of 200,000-300,000 tons -- stipulating that those whose work safety failed to meet required standards would be closed down within two years. It is also encouraging smaller pits to merge with larger ones, and it is predicted that in the next five years the number of coal mines in the province will have been limited to 2,500. “Mechanization, informatization and concentration are the development goals of China’s coal mines,” confirms Wang Shouzhen.

Reports of closures of Shanxi’s smaller pits frequently appear on the media. As an official from the Shanxi provincial administration of work safety says, “Our governor states that relevant township or town officials will be sacked in the event of coal-mining accidents, or upon the discovery of illegal coal mines. This should make them more cautious.” The same official expressed belief that this measure would discourage illegal coal mines that operate on the basis of collusion between their owners and corrupt government officials.

The High Added Value Industry Alternative

The higher demand for coal that began four years ago has appreciably raised the per capita income of Shanxi inhabitants. “Coal prices have reached an all-time high in the past two years, but a change in energy resource structure is inevitable; even the common people of Shanxi are clear about this,” says one Shanxi government official, concluding, “As this is a grave issue for rural dwellers who depend on coal for a living, we must do our best to minimize the negative impact of this change.”

Developing new-type coal chemicals seems to be the most viable alternative. The coal chemical industry encompasses liquefaction, gasification and the manufacture of coal substitutes for oil. Its operation compares favorably with coal mining’s high-energy consumption and heavy pollution.

Meng Chunqiu, general manager of Shanxi Haoyi Coal Coking Company, confirms that his company has invested RMB 10 million in new projects that, upon completion, will enable his company to make six new products. The most valuable, naphthalene, is used in the manufacture of food additives and moth balls. “Industrial naphthalene currently sells for RMB 7,000 per ton. We extracted it during the process of coal coking, production costs are low,” explains Meng Chunqiu.

The Jincheng Coal Industry Group is a leading coal enterprise in Shanxi. In 2005 its coal chemical income made up half of its total income. Wang Shouzhen reveals that by 2010, Shanxi’s coal-sale income will break RMB 3 billion, and that the income from non-coal products, such as coal chemicals, will reach RMB 100 billion, according to the 11th Five-Year Plan for Shanxi Province. To achieve this goal, the provincial government is to invest RMB 318 billion in the construction of new projects and technical upgrading of existing coal enterprises, of which RMB 200 billion is earmarked for non-coal production.

Shanxi has been exploring coal chemicals, and is technically equipped to accelerate their development. The prosperity of the coal market in recent years has enabled certain coal mining enterprises to accumulate funds with which to develop coal chemicals. There is, however, a current trend of low-level redundant development whereby coal chemical projects are confined to extracting oil and methanol from coal. The supply of such products will greatly exceed demand, which will lead to price-cutting wars and economic losses. This is a matter of grave concern to Wang Shouzhen.