China takes a more protectionist stance towards its coal miners

The Chinese government recently announced two tax measures targeting the coal industry.

The Ministry of Finance and State Administration of Taxation last week said a tax would be imposed on coal sales from 1 December. Rates will be set locally by provincial governments but must be between 2% and 10%.

Meanwhile, the Ministry of Finance also announced taxes on coal imports ranging from 3% for metallurgical coal to 6% for thermal coal. This joins a ban on low-quality coal imports imposed last month.

Australia is likely to be hardest hit by the new import tax, with Indonesian imports exempt under a free trade agreement between China and the Association of Southeast Asian Nations.

Two themes seem to be running parallel in these moves. The first is China’s increasing commitment to reducing and cleaning up its coal use in an effort to improve air quality.

But a second protectionist approach also seems be emerging towards China’s domestic miners, which have been hard hit by a flood of cheap imports that have dragged down prices and left many Chinese coal miners in the red.

Seen in this light, even the new tax on coal sales may not be as big a deal as it first appears: at the same time as the new tax comes into effect, previously existing “resource compensation fees” paid on coal will be ended, while the tax on sales of coal will have less impact than a tax on production would have in the currently oversupplied market.

And as Shannon Tiezzi of The Diplomat pointed out, leaving the tax rate to the discretion of local government will mean that regions with large coal mining industries, such as Shanxi, will be able to limit the tax’s impact on its coal miners.

Meanwhile, Reuters has also reported that Beijing has asked state-owned power producers to cut their coal imports by 40 million t from September to December. China imported 327.1 million t in 2013, about 10% of the country’s total consumption.

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