China launches inspections to halt excessive coal production

The Chinese government warned it may shutter coal mines guilty of producing above permitted levels, in the latest sign that regulators are getting serious about reining in overcapacity across industries.

The National Energy Administration is carrying out monthlong inspections in eight provinces and regions, including the biggest coal hubs of Shanxi, Inner Mongolia, Shaanxi, and Xinjiang, as part of a crackdown on overmining that it says has distorted the market. That’s according to a document from the agency dated July 10, which first began circulating on Chinese social media on Tuesday morning, and which people familiar with the matter later confirmed as authentic to Bloomberg News. The people declined to be named discussing a sensitive matter.

News of the inspections spurred a big rally in coal mining shares on Tuesday. The NEA couldn’t immediately comment when reached by phone.

Beijing’s focus on reducing overcapacity across sectors from steel to solar and autos has taken on renewed urgency in recent weeks as the authorities seek to halt the deflationary pressures hampering the economy. Coal industry bodies earlier this month sounded the alarm over “involutionary” competition and the ill-effects of fueling the nation’s supply glut, which has pushed prices to four-year lows.

China produced nearly 5 billion tons of its mainstay fuel last year, and is likely to post a seventh straight year of record output in 2025.

The regions targeted, which also include the provinces of Anhui, Henan, Guizhou and Ningxia, account for more than 90% of nationwide output. The inspections will run until Aug. 15 and firms found producing at more than 110% of designated capacity during the first six months of this year will face penalties including suspensions, according to the NEA’s notice.

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