Coal companies get government backing for mergers

China's coal-mining companies will receive government backing in domestic mergers and acquisitions, the National Energy Administration has revealed.

The move could help the country's coal industry, especially the smaller players, which are struggling to make a profit against tough market conditions.

"The government's financial measure will be beneficial for both the coal companies that want to acquire others and the smaller ones that would like to be merged," Zeng Hao, a coal analyst with Fenwei Energy Co, an industrial consultancy based in Shanxi province, China's biggest coal region, said.

A shares of major domestic coal companies soared on the Shanghai Stock Exchange after the administration's announcement.

China Coal Energy Company Ltd, the listed arm of the China National Coal Group Corp, closed up 10 percent, the daily limit, to 11.24 yuan ($1.82) on Tuesday.

China Shenhua Energy Co Ltd, the listed arm of the country’s biggest coal producer Shenhua Group, also closed up the 10 percent to 26.29 yuan.

Rumors also circulated that the coal giants were planning to merge. But Zeng said that was unlikely as they are the dominate players in their domestic and overseas markets.

Calls to Shenhua went unanswered while a source close to the managing director at China Coal said he was unware of a potential merger.