Energy & Resources

Into the tiger’s den

State coalminers cut output as massive anti-graft drive shocks Shanxi

Li Xiaopeng w

Detained Vice-Governor Ren

“The executive meeting of Shanxi’s provincial Party Standing Committee commences today,” Shanxi Governor Li Xiaopeng is said to have announced last week. “Of the 13 standing committee members, five were arrested, four are in meetings with investigators, three are on (unauthorised) overseas trips. So there is just one attendee (myself). The meeting will now begin.”

Of course, this one-man gathering didn’t really happen. The mocked-up minutes are just a joke that has gone viral via WeChat lately, according to Hong Kong’s Apple Daily.

But the jest isn’t too far from reality in Shanxi, a coal-rich province mired in a slew of corruption scandals featuring at least seven top officials (and counting). The detainees already include Ling Zhengce, brother of former President Hu Jintao’s top aide Ling Jihua. But the shockwaves continued to reverberate as two more members of the provincial Party Standing Committee were arrested on the same day this week. The vice-governor Ren Runhou was detained, while the province’s Party boss Yuan Chunqing was replaced by Jilin’s Party chief Wang Rulin on Monday, as Beijing leaders called for the surviving cadres to “improve Shanxi’s political ecology”.

Chinese President Xi Jinping’s anti-corruption campaign has already netted some major political heavyweights, together with several dozen senior officials. But the shake-up in Shanxi is unprecedented in its focus on a local government. Apple Daily notes that Li Xiaopeng, son of former Chinese Premier Li Peng, is now the odd man out in “the tigers’ den”, i.e. one of very few senior figures who doesn’t seem to be in trouble. All the same, the fact that Li junior (who is currently Shanxi’s deputy Party Secretary) wasn’t promoted to the position of Party boss last week also points to the “waning political influence of the Li Peng family”, according to the Hong Kong Economic Times.

Xue Lan, a professor at Tsinghua University’s School of Public Policy and Management, told the China Daily that Shanxi is particularly vulnerable to corruption investigations because of the shifting of franchise rights between state-owned coal firms and their privately-held rivals in recent years. This has provided opportunities for officials to solicit bribes, as well as collude with coal barons to fix prices, Xue believes.

So far several mining tycoons have also been detained or put under investigation, including the province’s richest man Zhang Xinming (see WiC145). It is unclear if more of the coal barons or their firms will become further embroiled as the anti-graft campaign continues to unfold.

For state mining giants, meanwhile, the aftershocks of the graft investigations are likely to engender greater obedience to the central government’s policy guidelines in the province. Datong Coal said last week it will cut coal production and sales by 10 million tonnes for the second half of the year, becoming the third state miner after China National Coal and Shenhua to curb output amid falling prices. Both firms announced 10% cuts to their own output for the year.

Thermal coal prices have fallen 20% since 2012. But the People’s Daily warns that “the winter” for China’s coalminers could be longer and more severe than many expect. “Output reduction alone may not lead the industry out of the current plight,” it warns. Instead it suggests that the state firms should see the slump as an opportunity to address “structural problems” including poor efficiency, weak environmental standards and the need for a long-overdue consolidation across a fragmented industry.

All these initiatives were policy objectives set out by Yuan Chunqing when he became Shanxi’s Party boss in 2010. But Shanxi’s coal barons have turned a deaf ear to most of the much-mentioned plan. With Yuan now replaced and most of his senior colleagues detained, perhaps the coalminers will show a little more willingness to comply.

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