FEATURE-Coal-rich China province seeks to curb mining craze

FEATURE-Coal-rich China province seeks to curb mining craze

by Kevin Yao, Source: Reuters

7th April 2006

YAO VILLAGE, China - The verges of the road to Nan Yu colliery are packed hard with coal spilled from countless passing trucks. The air is thick with dust and smoke from nearby coking plants.

But neither the worsening pollution in northern Shanxi province nor a government drive to streamline the industry deters Wang Shuqing, Nan Yu's assistant manager, from painting a rosy picture of the prospects for his state-owned mine.

"We'll be sought after since many small mines around here have been shut and other large mines are running out of reserves," Wang said as he showed a visitor round the ageing colliery, which he admitted was in need of fresh investment.

The mine near Taiyuan, the capital of Shanxi, is on track to turn out 300,000 tonnes of coal in 2006 and is seeking approval to triple output to 900,000 tonnes by 2010.

The plan presents the ruling Communist Party with a dilemma that is recurring frequently across China: how to preserve jobs while weaning the economy off old polluting industries.

Shanxi is a good illustration of this balancing act.

It is the top coal-producing province in a country that produces -- and consumes -- more of the stuff than anyone else.

"Shanxi is special because no other province relies so heavily on coal," said Gao Huiqing, an economist at the State Information Centre, a top government think tank in Beijing.

Coal Country

Shanxi turned out 600 million tonnes of coal in 2005, a quarter of China's total. But provincial governor Yu Youjun has pledged to put a brake on new mining to curb environmental damage, resource depletion and accidents.

Shanxi is closing collieries with annual output of below 90,000 tonnes, considered more prone to accidents and wastage, and is pushing the large remaining ones to use more advanced, environmentally friendly technology.

As part of Yu's campaign, some 4,800 illegal mines have already been shut in recent months and 1,200 people, including some 60 officials who were found to have invested in coal mines, have been punished, according to state media.

"Shanxi's economy did very well between 2001 and 2005, simply because strong demand pushed up coal prices," said Dong Jibin, vice-president of the Shanxi Academy of Social Sciences, the provincial government's think tank.

"But we've paid a huge price. That growth has put a lot of pressure on the environment and it's going to be a challenging job to stop it," Dong said.

Government data show Shanxi's economy expanded 12.5 percent in 2005, compared with national growth of 9.9 percent.

It now comes 16th in the economic rankings of China's 31 provinces and major cities, up from 21st spot in 2000.

The wealth effect of the coal boom is evident in the luxury cars parked outside Taiyuan's hotels and restaurants. Local newspapers say rich pit owners have been snapping up high-end apartments in Beijing and Shanghai.

Trying to go green

Shanxi's government revenues jumped 40 percent last year, the fastest growth of any province in China, thanks to increased taxes from coal mining and related industries.

But Shanxi is also home to China's three most polluted cities -- Linfen, Yangquan and Datong. Unchecked coal mining is also exacerbating already serious water shortages and subsidence is destroying valuable farmland.

Last year, 468 Shanxi miners died in accidents out of a nationwide casualty toll of 5,986.

Some Chinese officials and academics have campaigned for the adoption of "Green GDP" to help gauge the cost of choking smog, poisoned rivers and toxic waste.

Dong estimates that coal mining in Shanxi causes more than 30 billion yuan in environmental damage each year.

If environmental degradation and pollution were incorporated into GDP calculations, they would negate all Shanxi's growth for the past decade, according to a Deutsche Bank report.

The province faces a battle to turn its economy green.

Tourism offers a ray of hope.

Shanxi is home to the 600-year-old walled city of Pingyao, famed Buddhist temples in the Wutai mountains and grand compounds owned by rich Shanxi families before the 1949 Communist takeover.

Tourist revenues rose over 40 percent last year to $3.65 billion.

But Kong Xiangyi, an economist at the Shanxi University of Finance and Economics, is sceptical. He said Shanxi was living off the past -- its cultural heritage -- and, at the same time, cannibalising the coal it should bequeath to its descendants.

"We must leave some resources for future generations," he said.