Structural Change and Institutional Design of the Coal Industry in China

Author Name MENG Jianjun (Visiting Fellow, RIETI)
Creation Date/NO. April 2016 16-J-041
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One of the most important elements underlying the rapid growth of the Chinese economy is energy supply at a tremendous scale. Since the reform and opening up in 1978, coal has accounted for at least 70% of the energy supply in China for more than 30 years. The situation is constrained by the coal-dependent energy supply structure, which is ultimately determined by China's available natural resources. It is no exaggeration to say that what concerns the coal industry concerns China's energy supply.

There are 6,850 coal mining companies as of 2014 in China. This is in steep contrast to the situation faced by the oligopolistic oil and electricity sectors. Being sandwiched between the market and the government, China's coal production is characterized by both competitiveness and oligopoly, due to the market mechanism introduced since the economic reform. In this regard, it is critical to understand the role of restructuring of the coal industry in China, development of the Chinese economy itself, and understanding of the institutional change.

This paper attempts to investigate the structural change of the coal sector and  reorganization of the coal suppliers after marketization in China. First, I provide a general account of China's energy supply situation after the 1978 reform and examine the significance of the position of the coal industry in the economy. Next, I discuss the current development of the coal industry and the power distribution between the central and local governments based on the uneven distribution of coal resources. Third, I discuss nationalization and privatization of the coal sector by analyzing relevant policies and the level of concentration within the industry. Finally, I explore the policy environment and challenges faced by the coal sector. I argue that furthering the market-oriented reforms will be the key to its restructuring and reorganization .