Eliminating excess coal production capacity depends on the market

To eliminate the excess capacity of the coal industry, we must rely on administrative measures, but we must rely on "more play the role of the market."

According to media reports, during the eight years from 2006 to date, the fixed assets investment in coal mining and selection industry has reached a total of 3.1 trillion yuan. In the first three quarters of this year, the domestic coal production, sales, and consumption were negative year-on-year, and the coal industry saw this phenomenon for the first time in 10 years. The coal industry is now deeply in the middle of overcapacity.

In fact, in the last 10 years of the "golden period" of the coal industry, half of the factors are artificial.

During the period from 1998 to 2005, the entire coal industry was in a sluggish state, and national policies restricted investment in fixed assets. In 2005, China began to integrate resources for the first time, and a large number of small coal mines were shut down. This resulted in two results. First, a large number of coal mines were forced to undergo technological transformation and investment began to increase. Second, supply contracted, and the pattern of supply and demand changed from a loose one. As a result of tension, at the same time, the economy has improved and demand has risen. As a result, coal prices have risen and profits have started to increase. With this stimulus, huge amounts of money have poured into the construction of coal mines.

As a result of the influx of huge amounts of capital, the country currently has a total approved coal production capacity of 5.5 billion tons, including normal production capacity, expansion or expansion of new coal production capacity, and coal production capacity to be put into production. Last year, the country’s coal production reached 3.7 billion tons. Due to the rapid expansion of production capacity and the continuous decline in demand, China’s coal stock in the entire society exceeded 300 million tons for 34 consecutive months. There are now 8 provinces and autonomous regions where the coal industry suffers losses. The net loss of the 20 large coal enterprises in the first three quarters of the year was 10.5 billion yuan, and the net profit of the coal enterprises exceeded 80%.

It is an indisputable fact that the entire industry of the coal industry is suffering losses and the production capacity of the coal industry is serious. However, such a trend will continue and may even become more serious. As our country pays more attention to environmental protection and improves air quality, with the success of world shale gas energy, the price of oil and gas will decline, and China's coal consumption will continue to decline substantially.

The question now is how to face the serious overcapacity in the coal industry?

If the 3.1 trillion yuan invested in the coal industry in the past eight years is private investment, then the situation will be much simpler. The loss will be the responsibility of the market, but most of the 3.1 trillion yuan is state-owned assets. From 2005 to 2006, Shanxi, a big coal producing province, was taken as an example when large-scale coal enterprises purchased large-scale private coal enterprises.

The coal industry, like other energy industries and some industries that need to engage in capital construction, needs to be forward-looking in deciding whether to invest or not. At that time, our country had already raised the issue of environmental protection. Limiting coal consumption, especially limiting the direct burning of coal, has already been mentioned on the agenda. Therefore, the state-owned capital of all walks of life has been put into the coal industry on a large scale and the responsibility of those decision makers should be pursued.

The current overcapacity in the coal industry, like other industries with excess capacity, does not lie in accountability, but in how to resolve excess production capacity. Like Liu Yonghao's Oriental Hope Group, it can survive and develop in an industry with excess production capacity in the form of “cost reduction and efficiency increase” and improving labor productivity. After all, it is a minority. The vast majority of companies may still have to deal with restructuring and bankruptcy.

In the middle of last year, the liquidity tightened in the middle of the year. According to the market rules, a large number of enterprises in the excess capacity industry should be liquidated and bankrupted, so as to free up many stock assets and stock funds, and eliminate the “money shortage” phenomenon in the market. However, until now, almost all of China’s actions to eliminate excess production capacity have been subject to administrative intervention. Under administrative intervention, the elimination of excess production capacity will probably not release or revitalize stock assets and inventory liquidity, but will also increase the number of employees that will support those enterprises that have been eliminated.

There is actually a problem of bank-enterprise relations. For many coal companies, most of them still have coal deposits to sell. Although these companies have no future and the more they produce, the more they lose money, as long as they are still operating, they are not bad loans in bank accounts. Continue to keep them up.

At the beginning, state-owned enterprises from all walks of life invested large amounts in the coal industry, many of which were to the banks. The decision makers of the bank ** also need to be accountable. Because banks not only need to track the flow of funds from customers, but also evaluate the prospects of corporate and ** projects. Today, when many overcapacity companies are insolvent, only asking for a bad debt and continuing to make loans will actually increase the actual amount of bad debts. Where else is there a meticulous style of commercial banks that pay attention to the rules of the market? Only bureaucratic slams and slams are obliged.

To eliminate the excess capacity of the coal industry, we must rely on administrative measures, but we must rely on "more play the role of the market." Only in this way can the entire society's stock assets and inventory liquidity be revitalized and the Chinese economy transformed.