Paul French enters the dark world of China’s coal industry
Wherever it takes place, coal mining is a dirty business. However rigorous and enforced the safety regulations are, digging out the precious black stuff remains a hazardous occupation.
But it’s more hazardous for some than others. Recently I was in the UK when a miner died at a colliery in Yorkshire just weeks after the death of four miners in a Welsh pit.
The story was headline news and calls for an inquiry were vociferous. Coalminers dying in a developed economy like the UK are now a rarity, a shock and a big news story.
Compare this with China where, a week after the tragedy in Britain, at least 17 men were killed after a massive build-up of gas and coal exploded in a privately owned and operated colliery in south-west China’s Guizhou province.
This accident made the news – 17 is a big enough death toll in China’s long history of deadly mining disasters – but often mining tragedies are effectively not news but rather just part of China’s everyday economic story.
According to the Guizhou Daily newspaper, safety rules at the mine had been breached and inadequate safety measures were in place. Three members of the mine’s management have been arrested.
China digs up one-third of the world’s coal output but accounts for more than 70% of accidents. To be fair, if you’re shocked by today’s mining deaths in China, consider that deaths per million tonnes dug are now a relatively low 0.89, compared with a very scary 6.1 in 2000.
In China, improvements have been made since the public outcries that followed what seemed like almost daily tragedies around the turn of the millennium. However, in China’s private mines the death rate remains much higher than in state-run facilities, running at about 10 workers per million tonnes of coal mined.
Thankfully, the majority of mines are of the safer publicly owned variety.
Simon Powell, head of sustainable research for investment bank CLSA in Hong Kong and author of a recent report, “Still Dying for Coal? A Chinese Industry Half Way There”, identifies three problems with the industry: a lack of investment, a lack of safety processes and a continuing focus on short-term profits.
All three of Powell’s “causes” hold true, but there is also one other the report doesn’t dwell on – the endemic corruption in China’s coal industry that perpetuates those three factors.
You could read of the Guizhou tragedy and then refer to another coal-related story that appeared in the margins of the Chinese press around the same time. This told the story of a former senior executive at China’s third-biggest state-owned coal producer, the Datong Coal Mine Group,who was sentenced to life imprisonment for accepting $1.43m in bribes.
Stories of bribery and corruption in China’s mining industry – blind eyes being turned to safety and investment in an industry fuelled by a drive for profits – leaves this graft to fester. And this is a festering that turns fatal for too many miners.
China needs coal. Despite the massive push towards alternative energy in China – Beijing’s 12th Five Year Plan set very ambitious targets for renewables of a 15% share of energy in China’s overall supply by 2020 – coal will remain crucial to keeping the Chinese economic juggernaut on the road.
So the mining industry is here to stay. But how to improve it further? CLSA’s Powell in his report says the industry is “half way there” thanks to Beijing shutting down the worst offenders, crackdowns on notoriously treacherous illegal mines employing untrained migrant workers and a raft of new safety legislation.
To get all the way, Powell believes one method might be for other provinces to look at Shanxi’s fund to promote sustainable mining. A fee, charged to the mining companies, brings in about $2bn a year, which is then used to develop alternative industries, improve mine safety and start to tackle the issue of the environmental degradation coal mining leaves in its wake.
It’s a small start, but a positive one, and Beijing will need to continue to root out the corrupt mine managers and officials to ensure the momentum continues.
Paul French has been based in China for more than 20 years and is a partner in the research publisher Access Asia-Mintel.