Upgrade of coal sector suggested to drive growth

Northern China's Shanxi province, which produced over a quarter of the nation's coal in 2015, will continue upgrading coal-related industries to boost growth in the new year, said Governor Li Xiaopeng.

"Our province is under pressure from the economic slowdown," he said in his annual government work report to the provincial people's congress, which opened on Wednesday.

Difficulties include low coal prices and the pressing need to make the province's GDP greener through structural adjustment.

According to Li, the province will encourage industries such as coal-based clean energy, coal-based materials and coalbed gas. It will also further integrate coal mining, power generation and aluminum production to improve efficiencies and cut costs.

For that purpose, Shanxi will accelerate construction of 1 million metric-ton aluminum recycling industrial bases in Yuncheng and Lyuliang, as well as three aluminum industrial groups in the province.

Xu Hongcai, a researcher at the China Center for International Economic Exchanges, said the integration of coal mining, power plants and aluminum production is "rather creative".

"Coal ash contains a lot of aluminum oxide, which can easily be used to produce aluminum, thus cutting the cost for both," he told China Daily.

"The key is to effectively coordinate among the industries, and that's where Shanxi officials must work hard."

Han Xiaoping, chief researcher at china5e.com, a domestic energy information website, is not so optimistic about the integration.

"They can definitely reduce the cost of producing aluminum with coal ash, but how to sell the aluminum remains a challenge," he said.

"Shanxi needs to think outside the box and develop environmental protection industries to attract investment," he said.

Hu Yong, board chair of Shuozhou-based Runzhen High-tech, which produces floor tiles out of fly ash - a residue of coal combustion - hopes the province can combine coal with more industries because "downstream products make more profit than coal itself".

"We can make 40 high-quality doors out of a ton of fly ash, which cost less than 200 yuan ($30)," he said. "If the industries get coordinated that will be more profitable."

In the work report, Li also set a 6 percent goal for provincial GDP growth in 2016, almost double that of 2015. "The province has large potential for further growth," he said.

"By setting such a goal we mean to be positive," Li said.

As China faces a new normal of slower economic growth, most provinces, municipalities and autonomous regions have been adjusting their growth goals downward for 2016.

Shanxi is one of the few provinces daring to do the opposite.

Xu said the goal is possible, but to reach it Shanxi must upgrade its economic structure.

"Shanxi has economic potential," he said, "but how to exploit it will be a challenge."

Han from china5e.com said that Shanxi must get rid of its reliance on coal to realize that goal.

Contact the writers at sunruisheng@chinadaily.com.cn and zhangzhouxiang@chinadaily.com.cn

(China Daily 01/28/2016 page5)