China has abundant coal resources with scattered distribution. All types of coal with high quality have been explored. Most of them are of low sulfur, low-medium ash and medium-high thermal value. The examined coal reserve is over 1 trillion tons of which 189 billion tons can be used directly. This means that the coal can be mined for a hundred year according to the annual output of 1.9 billion tons in 2004. With the advancement of exploring level and technology, part of the remaining reserves and resources can be upgraded to more cost-effective reserves. Hence they can be further developed and utilized.

Regarding to the coal resource, the exploring level of coal resources is low although the potential of coal reserves is high. Most of the coal resources are discovered through general survey. The per capita reserve is below the world’s average level. Therefore the guarantee level of coal resource needs to be enhanced. Moreover, China’s coal industry is facing the problem of lack of coking coal and the insufficiency of effective resource supply.

Regarding to the coal productivity, the production increase in the large and medium mines has been limited in recent 3 years due to the significant decrease in the scale of new mines construction from 1995 to 2000 (the period of the Ninth 5-year Plan). Compared to the surging demand of coal in recent years, the productivity is lagged behind.

In general, the current coal market can be summarized as: Basically balance between demand and supply, but demand pressure occurred in certain regions and certain types of coal. The regional demand pressure is mostly caused by the 5 main factors:

1. The large demand for resources
2. The insufficiency of reserve supply
3. The limitation of transportation
4. The conflict between the price of electricity and coal
5. The factors of safety production.

The rapid increase of the heavy industry is the structural feature of China’s economics growth at present. In 2004, China’s GDP increased 9.5% compared with 2003. The increase of heavy industry was 4% higher than the light industry. Rapid growth has been occurred in the major coal consuming industry such as coal-fire power generation, iron and steel industry, cement industry and coking production. The coal-fire power accounts for 74% of the total power. Over 50% of the overall coal production is used for generating power, which is the main factor for the increase the coal demand.