Coal Gets Too Big for Beijing
Fish, Isaac Stone, Newsweek International
Byline: Isaac Stone Fish
China's high-profile battles with foreign companies--from Rio Tinto to Google--have been keeping CEOs up at night. But overseas firms aren't Beijing's only targets, as a fight between the country's private coal miners and the government shows. Easy profits and lax regulation have spawned a coal industry infamous for pollution, corrupt bosses, and dangerous working conditions. Now China is using these sins to justify nationalization. Over the past three years, Beijing has halved the total number of coal mines in China to about 13,000, mainly closing private mines, says an industry source. And the economic crisis has accelerated the process--local authorities are taking advantage of declining coal demand to buy up or bankrupt smaller private firms. New regulations also make it difficult for private mines to renew their licenses, and owners face tight restrictions on mine size and equipment.
While the government claims it's promoting better (read: state-owned) firms at the expense of weaker ones, the reality is that China wants to rein in independent sources of wealth that it fears could grow too big to control. This trend, known as "the country advances and the private retreats," allows Beijing to increase its power over the economy by funneling resources into more pliable state companies. …