Economic analysis of reform policies for small coal mines in China

Over the last three decades, China's coal industry has achieved dramatic increases in coal production, both in absolute terms and relative to the world as a whole. This achievement is due largely to its coal policies. Yet facing increasing pressures of environmental sustainability and market transition, the Chinese government was forced to make deep reforms and adjustments to regulate the coal industry effectively. This paper presents an historical overview of China's coal economic policies, paying particular attention to the current reform policy of closing mines and restricting the yield for the small coal mines (SCMs) in the context of economic theories and methods. We argue that the SCM closure policy would not likely be efficiently enforced if a feasible market mechanism were not built up. The failure of closure policy is due largely to problems of property rights, coal pricing, ownership, and objectives. (C) 2002 Elsevier Science Ltd. All rights reserved.