Local Governments in Coal-Rich Chinese Province Can’t Meet Payroll

Nearly 87 percent of county government in Shanxi Province couldn’t pay the salary of their civil servants as coal price dropped.
Local Governments in Coal-Rich Chinese Province Can’t Meet Payroll
A Chinese man carries coal he collected from a sorting area at a coal mine on November 25, 2015 in Shanxi, China. Kevin Frayer/Getty Images
Frank Fang
Updated:

The collapse in coal prices has hit home in northern China’s Shanxi Province, as coal companies and local governments have found themselves unable to meet payrolls.

Coal is king in Shanxi, which possesses about one-third of China’s total coal deposits. Even though demand for coal has fallen with the slowdown in China’s economy, coal has remained in oversupply, and prices have plummeted.

The current hard times occur in the context of recent prosperity. In 2002, coal prices increased sharply from 200 yuan (about US$31) per ton in 2002 to 1,070 yuan (about $165) per ton in July 2008. Though the ensuing global financial crisis saw a dip in the price, the coal prices climbed back up to 853 yuan (about $131) in August 2009, according to the state-run China Times.

Coal prices in Shanxi took a hit beginning in 2014. By July 2015, the coal industry had been losing money for 12 straight months. By Nov. 23, the price had fallen to $51 a ton.

For the first three quarters of this year, the coal industry in Shanxi suffered a loss of 7.037 billion yuan (about $1.08 billion). Coal companies failed to pay workers’ salaries totaling 3.5 billion yuan (about $539 million), and failed to pay 10.9 billion (about $1.68 billion) for social security insurance.

A coal mine at Datong in Shanxi Province on Nov. 20, 2015. 103 county governments in Shanxi couldn't pay the salary of their civil servants as coal price took a dive. (Greg Baker/AFP/Getty Images)
A coal mine at Datong in Shanxi Province on Nov. 20, 2015. 103 county governments in Shanxi couldn't pay the salary of their civil servants as coal price took a dive. Greg Baker/AFP/Getty Images
Frank Fang
Frank Fang
journalist
Frank Fang is a Taiwan-based journalist. He covers U.S., China, and Taiwan news. He holds a master's degree in materials science from Tsinghua University in Taiwan.
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