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Running on Fumes
A Coal Bubble in China?

There’s been plenty of talk about China’s housing bubble, but a spate of bad news for the country’s massive coal industry could be more significant for the country’s economy. Business Spectator reports:

More than 70 per cent of China’s coal firms are making losses, the head of the coal industry association said last week, with prices eroded by falling demand growth, a worsening supply glut and a war on smog.

Wang Xianzheng, the chairman of the China Coal Industry Association, told an industry forum that the problems facing the coal sector were expected to get worse, official news agency Xinhua reported.

Greens will be happy to hear about coal miners losing money, but there is more to the story than this. As it is, coal remains a primary energy source in China, so this story has more to do with the economy than with global warming. A glut in coal driven by slack demand points to broader slowing of the Chinese economy and underlines the concerns many have expressed that China’s old invest-for-export economic model has reached a limit.

The best environmental news here is the government-encouraged shift away from (often) undercapitalized and unsafe small mining operations to larger ones. This at least offers hope of regulating the process of extraction, if not yet of reining in consumption.

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  • kalendjay

    The reason apparently is that China relies on 1920’s style shaft mining, which must go deeper and deeper each passing year. A significant amount of its iron ore is mined the same way, even as numerous competitors have strip mines and higher grade ore.

    This makes China no more competitive or wise a capital investor in basic industry than — Ukraine?

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