China's coal industry transformation: performance, challenges and prospects

This thesis examines the perfonnance, challenges and prospects of the Chinese coal industry under transfonnation in the market transition period from 1993 to date. The tenn 'transfonnation' is used intentionally to distinguish it from 'transition', which is more commonly used. While issues arising from state-ownership are central in an economic transition, the tenn 'transfonnation' also takes into account the existence of China's other specific challenges including the many small scale mines, poor mining safety, and pressure on the industry's prospects resulting from increasingly stringent environmental regulations. In studying these transfonnation issues, both quantitative and qualitative methods are applied. Qualitative methods include cases and institutional studies, comparative studies and field investigations. In tenns of quantitative methods, the stochastic frontier approach, index decomposition and advanced econometric models such as fixed effects, negative binominal, are employed. In the stochastic frontier approach, the estimated impact of refonns on mines' technical efficiency is considered to evaluate the effectiveness of refonns. The thesis finds consistent evidence of the effectiveness of refonns and transitional policies applied to the sector, including privatisation, decentralisation, consolidation, export liberalisation, changes in corporation governance, debt restructuring and participation of the unemployment insurance. The relinquishment of state ownership is also found to increase mining technical efficiency. The study shows that the level of marketisation has been increased consistently during the sample period 2000-2005. Overall, the industry has been subject to decreasing returns to scale during the sample period. The thesis also studies the issue of regularising China's infonnal small coal mines. Through a study of global practice in regularising small-scale mining (SSM) and the Chinese recent experience, the thesis proposes an appropriate governing framework to regularise China's small coal mines. Three elements are found to be crucial to regularise the SSMs: effective legal and fiscal frameworks; the capable enforcement of legislations through alignment of interests and stakeholder participation; and technical and financial capacity of small-scale mines. These elements are used to evaluate China's experience in regularising small-scale mines. Based on the evaluation and the understanding of roles and challenges in China's small coal mines, policy implications and a good