Resource-Based Local Economies and Mining Regulation 1980s–2000s
As China’s demand for energy and raw materials grew after economic reform, mining expanded rapidly across many resource-rich regions. Coal was especially important. State-owned, collective, township, and privately operated mines all increased production, helping relieve long-standing energy shortages and supporting local employment and government revenue.
This expansion also created a new environmental and resource-governance problem. Many small mines operated with low recovery rates, weak safety standards, fragmented licensing, and limited capacity for land restoration or pollution control. Illegal extraction, overlapping mining claims, resource waste, and serious mining accidents became increasingly common. In many mining regions, local economies also became heavily dependent on the same mines that regulators were trying to control.
By the 1990s, mining policy began to shift from encouraging production toward regulating ownership, licensing, resource conservation, and the closure of illegal or poorly planned mines. The central question was no longer only how to extract more resources, but how to control who could extract them, under what conditions, and at what environmental and social cost.
Policy Response
1986 — Mineral Resources Law of the People’s Republic of China
“中华人民共和国矿产资源法”
The law established that mineral resources belong to the state and required exploration and mining activities to obtain official approval and mining rights. It also introduced the principle of rational development and protection of mineral resources.
Official English source:
https://english.mee.gov.cn/Resources/laws/envir_elatedlaws/200710/t20071009_109919.shtml
1996 — Revision of the Mineral Resources Law
“中华人民共和国矿产资源法（修正）”
The 1996 revision strengthened the licensing system and reinforced state control over exploration, mining rights, and the protection of mineral resources.
Official Chinese source:
https://www.nea.gov.cn/2011-08/19/c_131060691.htm
Official English text incorporating the 1996 revision:
https://en.cgs.gov.cn/laws/ls/201603/t20160309_266050.html
1996 — Interim Provisions on the Management of Closed State-Owned Key Coal Mines
“国有重点煤矿关停矿井管理暂行规定”
The provisions set formal procedures for closing or suspending state-owned coal mines whose resources were nearly exhausted, whose mining conditions had become too difficult, or whose operations were persistently uneconomic. They also framed mine closure as an issue of resource protection and state asset management.
Official Chinese source:
https://www.nea.gov.cn/2011-08/17/c_131055736.htm
1998 — Notice on Closing Illegal and Poorly Located Coal Mines
“国务院关于关闭非法和布局不合理煤矿有关问题的通知”
The State Council ordered a national campaign to close illegal and poorly located small coal mines. The policy explicitly cited blind expansion, low-level duplicate construction, illegal mining, resource waste, environmental damage, and frequent accidents as major problems.
It set a target of closing 25,800 coal mines and reducing production capacity by 250 million tonnes by the end of 1999. Mines without both a mining licence and a coal-production licence were to be closed, while mines producing high-sulphur or high-ash coal without effective controls could also be shut down.
Official Chinese source:
Small Coal Mine Closures
1998–2000
By the late 1990s, China’s coal industry faced a combination of oversupply, falling prices, poor mine safety, resource waste, and widespread illegal or poorly regulated small-scale mining. Township and village coal mines had become a major source of domestic coal, but many operated with low recovery rates, limited safety controls, and significant environmental damage.
In 1998, the State Council launched a nationwide campaign to close 25,800 illegal or poorly located small coal mines and reduce annual coal production by about 250 million tonnes. Mines without proper licences, mines operating inside state-owned mining areas, and mines producing high-sulphur or high-ash coal without effective treatment were among those targeted.
The closures had major social consequences. Later research on mining regions found that the campaign was implemented so quickly that many local governments had little time to prepare alternative employment or replacement industries. Hundreds of thousands of workers lost their jobs, while coal-dependent local governments experienced immediate declines in revenue.
Selected Sources
“哪些矿井将被关闭” — “Which Coal Mines Will Be Closed?”
People’s Daily, December 7, 1998
Worker Displacement and Local Fiscal Decline
1998–2002
The closure of tens of thousands of small coal mines created an immediate social and fiscal shock in coal-dependent regions. Many township and village mines had become more than extraction sites: they supported local employment, supplied income to surrounding businesses, and contributed heavily to county and township government revenue.
Because the national closure campaign moved quickly, many local governments had little time to prepare replacement industries or employment programmes. Research on Chongqing found that hundreds of thousands of workers lost their jobs, while many local governments experienced an immediate decline in revenue after small mines were closed. The poorest and most coal-dependent areas were generally the least able to absorb the shock.
The employment impact was visible nationwide. In early 1999, China’s coal sector planned to lay off about 400,000 workers as part of the broader restructuring and mine-closure programme. In some regions, governments had to create dedicated resettlement measures. Guangdong, for example, estimated that the closure or bankruptcy of provincial coal mines would require new employment arrangements for more than 30,000 workers, many of whom lived in remote mountain areas with few local alternatives.
Selected Sources
“Coal Sector Faces Massive Closures, Lay-Offs as Financial Crisis Deepens”
South China Morning Post, January 9, 1999
“关闭小煤矿过程中发生的费用原则上由地方承担” — “Local Governments to Bear the Costs of Small Coal Mine Closures”
People’s Daily, September 22, 2001