They’re the pits

Local media focuses on the huge fortunes of Shanxi’s coalmine bosses

They’re the pits

He risks his life, I make a billion

It was not the type of story likely to improved the reputation of China’s coalmine bosses. Last week, 21CN Business Herald reported that Hao Jianxiu, a member of the CPPCC from Shanxi province, was detained after he reportedly bribed police officers and a local hospital to forge the death certificate of a prostitute. She’d died from a drug overdose when out partying with Hao’s pal Luo Mingfu, a high-profile Shanxi coalmine boss, says the newspaper.

Not only did Hao and Luo try to cover up the girl’s death, they also had her body cremated without informing her parents (21CN says that Luo has also been detained).

Luo’s story – a particularly dramatic one – is another reminder of why Shanxi’s coalmine bosses have earned an image as some of the most reviled businessmen in China.

Their reputation is for ruthless, greedy and uncivilised behaviour. For a start, China’s coalmines are notoriously dangerous and many of the worst accidents have tended to happen in Shanxi, where coalmine owners chase profits by cutting corners on safety and limiting benefits for workers. In 2011, Shanxi had 54 accidents and 74 mining deaths.

The coal barons also have a reputation for paying government officials to turn a blind eye to safety violations or instances of illegal mining. The collusion is often exposed in the aftermath of disasters at illegal mines. In 2010, Hao Pengjun, a former county mine bureau chief, was investigated after 277 people were killed when a waste pond burst its banks at one mine, burying an entire village in sludge. Hao, who was sentenced to 20 years in prison, was found to have amassed Rmb305 million ($48 million) in kickbacks.

“The money Hao Pengjun made was about average for a guy in his position. If you do not pay off government officials, there is no way you will open a mine,” Chu Ren, a retired coal expert at the Shanxi Academy of Social Sciences, told AFP at the time.

The suspicion is that funds that should have been spent on mine safety are sometimes redirected into lavish lifestyles of inner-city mansions and fleets of luxury cars.

One coal boss also grabbed headlines in March by spending Rmb70 million on his daughter’s wedding in Hainan (he later claimed it was only Rmb15 million), booking out the Ritz-Carlton, Marriott and Hilton hotels. The bride’s dowry reportedly included six Ferraris.

Similar stories of conspicuous consumption only fuel resentment towards the Shanxi magnates. But other coal bosses have fallen on harder times. Since late 2008, the industry has witnessed a trend towards guojinmintui (a term meaning ‘the state advances as the private sector retreats’). To improve safety and efficiency across the industry, the government is trying to close smaller private mines or fold them into larger, state-owned peers. The policy has been enforced with particular vigour in Shanxi (a trend we first mentioned as far back as WiC1).

Although the move has been resisted by many of Shanxi’s mine owners, Beijing has meant business. On paper at least, the number of coal mining enterprises in the province has fallen to 130 from 2,600 over the past two years. As compensation, coal bosses were given Rmb200 billion in cash or shares by the government.

More recently, coal prices have continued to fall, largely as a result of shrinking domestic demand and cheaper imports (see WiC154). “Times are tough for coal production enterprises. Imports are going up and prices are coming down. Margin is squeezed,” coal industry analyst An Zhiyuan told the Global Times, adding that many coalmines are opting to shut down temporarily until the market turns.

It’s not only in Shanxi. Other coal-rich provinces like Shaanxi and Inner Mongolia are also reporting falling coal prices. Many mine owners are trying to seek out new customers – unfamiliar territory for businessmen more often used to operating in a sellers’ market.

Meanwhile, for those that have sold their assets, the question is what to do with the money they’ve been paid. According to the Guangzhou Daily, the restructuring of the industry has forced many bosses into early retirement. “Now that they have retreated into the shadows, they have become rich idlers,” says the newspaper.

Many are using their downtime to develop second careers. The options can be limited as most of the former bosses are not highly educated. Shanxi Daily News reports that the highest level of schooling among bosses in the province is usually high school (meaning that they finished education by the time that they were 18). The majority concluded their schooling before then – at middle school level – and there are even some who did not make it past an elementary education.

Another favourite option for the former bosses is property, and many have snapped up apartments in Beijing and Shanghai (in many cases, paying in cash). Others have got involved in underground lending.

There are other alternative careers. Former coal boss Wu Yongjun, has invested in organic agriculture. Another coal baron Lu Hongbo decided to go into smartphone handsets (see page 8).

But for some of the former bosses, retirement doesn’t necessarily lead to a life of golf, foreign holidays and general relaxation.

According to an industry insider in Linfen, a coal town, there has also been a spate of kidnapping incidents targeting coalmine bosses and their families. Though the number of abductions has never been made public, the trend has persuaded a lot of coal bosses to keep a much lower profile.

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