Opinions of the State Council on Resolving Overcapacity in the Coal Industry and Realising Development Out of Difficulties

Recognising the coal mining sector as the basic industry of the national economy, this policy aims to promote structural reforms and effectively reduce overcapacity in the sector. The policy is based on three basic principles: (1) combining market forces and government support; (2) resolving and controlling production capacity; and (3) applying best labour practices.

The Council's main tasks under the policy are to:

1. Strictly control new production capacity. The State Council will stop approving new coal mine projects and slow down production capacity increase projects within three years.
2. Accelerate elimination of poor performing coal mines or those that do not conform to industrial policies. The government identified 13 categories of poor performing small coal mines for closure as well as those that overlap with environmentally-important areas (e.g. nature reserves, scenic spots, and drinking water source protection areas) which are to be closed and withdrawn as soon as possible. The following are to be phased out within 1 to 3 years: Coal mines with a production capacity of less than 300,000 tons per year and that have serious or exceptionally serious safety accidents, coal mines with a production capacity of 150,000 tons or less and that have large, serious or exceptionally serious safety accidents, and coal mining methods that are explicitly prohibited by the state Coal mines that lack advanced technology and technology and cannot implement technical transformation.
3. Promote enterprise reform and reorganisation. The government encourages large-scale coal enterprises to merge and reorganise small and medium-sized enterprises and further improve mining standards and production levels in safety, environmental protection, energy consumption and technology. It set a goal to achieve a production scale of more than 3 million tons per year for a single coal enterprise in 3 years.
4. Promote industry adjustment and transformation and acceleration of coalbed methane industry. The government will give a reward to coal enterprises with a production capacity that exceeds a percentage of actual coal consumption. This measure also calls for the establishment of a coordination mechanism to promote resource development in areas where coal and CBM rights overlap. The guiding principle for such a mechanism is that CBM development serves coal development; therefore, the scope of CBM rights will be adopted to give priority to ensuring the needs of coal development. The measure calls for the implementation of low-concentration gas collection, purification and utilisation technology research to improve the utilisation rate of coal mine gas. 
5. Strictly manage unsafe production. Through this measure, the government will intensify the supervision of coal mines as regards safety and suspend those that do not meet the conditions for safe production.
6. Strictly control over-capacity production. Starting from 2016, the production capacity of coal mines will be re-determined based on the annual operating time of no more than 276 working days. 
7. Strictly manage illegal construction. Coal mines with incomplete basic construction procedures shall be ordered to suspend work and production, and those who refuse to suspend work and production, or organise construction and production without authorisation, shall be closed.
8. Strictly limit the use of low-quality coal. Under this measure, the government will stop the approval of high-sulphur and high-ash coal projects, guide the postponement of construction of approved projects, reduce the scale of projects under construction, and limit the output of projects that have been put into operation.

Measures to implement the above include: a special reward and subsidy fund for structural adjustment of industrial enterprises, well-implemented employee resettlement plans and reemployment assistance, financial support for failing coal enterprises, renewal and transformation of mining areas and the redevelopment and utilisation of land, among others.

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