During the 19th CPC National Congress, Minister of China’s National Development and Reform Commission He Lifeng said that China had so far (by mid-October) reduced more than 400 million tons of its coal capacity. The capacity was cut by 250 million tons in 2016, more than expected. The reduction target of 150 million tons this year had been met ahead of schedule.
        There are two main reasons for the success of the reduction in coal mining capacity. Firstly, the pressure of environmental management objectively accelerated the process. Secondly, with the improvement of the coal economy, coal mining companies have improved their financial situation, with more resources to invest in the reduction effort.
        According to a study published by the China Coal Research Institute (CCRI) on the key issues in the supply-side reform of China’s coal industry, the key to the success of the supply-side reform for the transformation of China’s coal industry is the proportion of scientific production capacity.
        In terms of coal quality improvement, there’s hardly any clear distinction between capacity reduction and quality improvement. With increasingly stringent environmental standards and mounting pressure of environmental management, the environmental standards automatically turn into coal quality standards. The market automatically eliminates the low-quality coal that does not meet environmental standards.
        In terms of the proportion of scientific production capacity, the coal industry still faces a daunting task of furthering supply-side structural reform. Statistics show that the proportion of scientific production capacity of China’s coal industry was only 50 percent in 2015. At present, China has greatly improved its coal industry concentration rate. The output of the 14 large-scale coal mining bases accounts for 94 percent of its total output. The number of mining companies  with an annual sales revenue of 20 million yuan or more has been reduced from 7,869 in 2012 to 5,067 at present. The number of coal mines has been cut to fewer than 8,000. However, there remains a long way to go to achieve the target proportion of scientific production capacity put forward by CCRI in its study ̶ 71 percent by 2020.
        The task of coal capacity reduction has entered a new stage with continued pressure. The administrative dominance in this endeavor will be gradually abolished, while a market-oriented mechanism will be established to eliminate backward production capacity.