Regional policy grounded in minerals exploitation: A Chinese example

Resources Policy 1994 20 (1) 5-13

Regional policy grounded in minerals exploitation

A Chinese example

Daniel Todd and Zhang Lei The authors are with the Department of Geography, University of Manitoba, Winnipeg, Canada

Mining in general and coal mining in particular presents the development planner with a number of challenges which stem directly from its well known shortcomings. These revolve round lahour usage, instability, the phenomenon known as leakages and various questionable impositions on the environment. Against these and other defects must he set certain advantages, not least the opportunity afforded by mining to create growth poles able to foster regional development. China has attempted to mould its coal mining industry in a fashion that simultaneously permits the fulfilment of national and regional development goals. The national goal is addressed through investment in places promising the most cost-effective production over the long term; the regional onus comes to the fore in attempts to convert such places into growth poles. Shanxi constitutes the regional cynosure of these converging policies, as the article makes clear.

Anyone advocating mining as the centrepiece of a regional (ie subnational) development strategy must be prepared to brave accusations of misguided en- thusiasm or worse. Since in some quarters mining is burdened with an image bordering on infamy, one according it the role of villain of the piece in wrecking communities, this reaction is not altogether surprising. Yet there are reasons aplenty for urging sober reflection of such a strategy even when those who hold mining in unjustifiably low esteem are discounted. After all, mining developments past and present have spawned a catalogue of problems which have been readily apparent to the industry’s devotees as well as its detractors. In the first place, mining is overspecialized, reliant on plant and equipment that cannot easily be turned to other uses when operations cease or are interrupted. In those branches of it characterized by large work- forces (in which coal mining figures prominently), labour also tends to overspecialization in the sense that it is prone to persistent structural unemployment when mining activity lapses. In the second place - and in part stemming from the previous point _ it is liable to engender negative externalities; effects which are not only noticeable but often of epic proportions. Derelict plant and scarred land-

scapes long littered the metal mining districts of the UK, and abandoned, rusting winding gear and over- grown rail sidings not only marked the same country’s coalfield topography but seared the minds of a generation exposed to them.’ Unsightliness, of course, is relatively innocuous in comparison with the wider and insidious environmental damage which may arise from mining activity. The industry has rightly been taken to task for such blemishes in recent years.

Third, much mining activity is extremely sensitive to outside influences and - what amounts to the same thing - susceptible to violent disruptions as a result of fluctuating global price levels. These char- acteristics have effects which are particularly doleful at the regional level, upsetting the even tenor of employment in what are all too frequently one- industry towns on the one hand, while fostering extensive leakages (transfers of wealth to outsiders) on the other. To cap it all, mining relies on a wasting resource; an inescapable fact suggesting that even the most bountifully endowed mining area is

‘The former is evoked in Richardson, 1974, while references to the latter are legion, perhaps the most stirring of which is Orwell (1937).

0301-4207/94/010005-09 @ 1994 Butterworth-Heinemann Ltd 5

Regional policy and minerals exploitation: D. Todd and Z. Lei

bracketed about with time limits and, consequently, must strive while good times last to overcome the ‘leakages’ problem and pursue economic diversifica- tion. Regional policy, at least as practised in the West, has been attuned to countering these well known flaws of mining. In both the UK and the USA, for example, it has assumed the mantle of job creation agency for redundant coal miners (often through make work infrastructure projects, some aimed at recovering land blighted by despoliation) or, failing that, has stepped into the void to provide retraining and social benefits.2 Perhaps understand- ably, its preoccupation with remedial action has overshadowed all attempts to capitalize on the strengths of mining as an instrument of development planning.

Spared both the notoriety tingeing mining and the stigma attaching to interventionist planning, policy makers in developing countries have been much less reluctant to espouse the industry as a means of promoting regional well being.3 To be sure, the pitfalls attending mining are as blatantly obvious there as in the West. We need only cite the Bougain- ville instance in Papua New Guinea to appreciate the stark cultural incompatibilities which sometimes ex- ist between the demands of modern, large-scale mining masterminded from outside and the wants of local residents (Thompson, 1991). Bougainville serves as an extreme example of the clash of outside and regional interests, but the typical situation con- fronting mining in developing areas where the interests of the upper echelons of the workforce, overwhelmingly staffed by outsiders, are pitted against those of lower echelons, which usually de- volve to workers of local origin, lends itself to adversarial labour - and community - relations almost as a matter of course.4

If, and this proviso is discouragingly large, the innate problems of labour relations and negative externalities can be resolved (or at least contained), mining promises all the benefits that growth poles

‘Two landmark instances of regional policy inspired by declining coalfields were the imposition of the Special Development Areas on the UK assisted areas in 1967 and the passage of the Appalachian Regional Development Act by the -US Congress in 1965. For the former, refer to Lee (1980): for the latter, see Cumberland (1973).

\ I.

3This is not to overlook the fact that some have succumbed to the Western tendency of propping up ailing coal mining industries in the name of self-sufficiency and job preservation. Taiwan was a case in point: its government insisted that mining be perpetuated (producing 1.8 Mt in 1985) in spite of limited reserves and costly extraction, See Council for Economic Planning and Development (1985). This policy has recently been abandoned by the Taiwan authorities. 4Labour can account for half of mine operating costs even after wide-ranging technology inputs are taken into account: note Bosson and Varon (1977). As a production factor, it is at one and the same time a boon - with job creation acting as a major selling point in regional development - and a curse: the sizable workforce and its segmentation is conducive to social instability. These issues were expressly addressed in Radetzki (1982).

can insert into so-called ‘resource frontier’ regions. These last, coined by Friedmann (1966) and vested with an explicit mining connotation by Spooner (1981) are fuelled by that combination of production activities bound together by common material linkages and ample provision of infrastructure, especially transport facilities, which coalesces to fashion growth poles. The production attributes of the poles are best conceived as industrial complexes in general and metallurgical-mechanical engineering complexes in particular. Transport systems, for their part, are indispensable to the growth pole not only in their ability to render possible an efficient means of transfer from the mine to the customer, but in their use as common carriers by all regional activities to boot. This is not the full measure of growth pole benefits by any means; for the multiplier mechanism triggered by the introduction of mine, factory and infrastructure gathers momentum to such a degree as to coax into existence a whole host of increasingly unrelated activities. In practice teasing growth poles into existence is a task designed to stretch the resources of planners almost to the limit; but the skills of these guardians of regional development are taxed further in ensuring that the bedrock of the pole, mining, is both firmly established and shorn of the handicaps outlined above.

China has gone a long way towards accomplishing these ends, using coal mining as its chosen instrument. At the heart of its endeavours is Shanxi Province, the crux of the region earmarked for development. The Chinese government has con- ducted a series of policies and programmes intended to knit together national and regional goals. Secure in .the knowledge that enormous coal reserves on the one hand and seemingly insatiable energy demand on the other conspire to downgrade two of the concerns afflicting mining elsewhere - namely, what to do with overspecialized plant in the event of closure and how to come to terms with price instability in the face of faltering markets - Chinese planners can afford to assume a deprecatory attitude towards these bugbears. Moreover, stepped up coal output in conjunction with the economic diversifica- tion incident to growth poles should allay the con- cern exercising the minds of Western planners; that is, how to find work for miners made redundant through improving labour productivity. Besides absorbing surplus labour, the growth pole is ex- pected to curtail leakages by, first, providing substi- tutes for supplies hitherto imported into the region and, second, capturing a portion of the value-added emanating from coal utilization as a result of divert- ing some of its output into local industries. Over- coming the environmental damage which has already been occasioned by coal mining and which is bound to grow in tandem with further mining developments defies easy solutions, however. The planners are candid in conceding the seriousness of

6 Resources Policy 1994 Volume 20 Number 1

the problem but plead the pressing demands of a huge population in mitigation. Justification for this stance becomes clearer as the circumstances leading up to the current situation are unravelled.

The Chinese context

Unlike regional development initiatives in the West, those in China are not primarily motivated by local- ized unemployment and welfare considerations but are rather conceived from the outset as subordinate to a hard headed appraisal of national needs. Rank- ing among the leaders in the set of national needs is the insistent requirement to eradicate the mismatch between energy supply and demand. Coal is the cornerstone of China’s energy supply by virtue of its great abundance; for the country boasts resources in excess of 640 billion tonnes (Gt) and proven reserves of the order of 2 Gt. Coal is not evenly distributed, however, and therein lies the rub. By one reckoning, no less than 20% of industrial capacity was idle in the 1970s owing to energy shortages in general and lack of coal deliveries in particular. Factories in coastal districts were especially vulnerable to disrup- tion because it was the coast that held title to the lion’s share of industrial plant on the one hand and it was the coast that was awkwardly located in relation to the country’s principal source of coal, the north (accounting for fully two-thirds of resources), on the other.5 Coal mining developments from 1950 through to the end of the 197Os, while pursued with vigour, ultimately proved disappointing in that they failed to assuage the energy needs of growing regional economies, much less to right the supply-demand imbalance.


coastal areas in direct opposition to regional impera- tives aimed at decentralizing economic activity away from the coast. At the same time, mining investment inspired by regional policy tended to favour areas which, for their own part, were devoid of economic potential and which,- because of tenuous linkages with energy markets, were denied the growth stimulus afforded by exports. In short, mining strategies were found wanting on both counts of development, national and regional.

In part this failure arose from a misguided emphasis on investment in small-scale undertakings sup- posedly redeemed through their locational advantage of short-distance haulage to coastal markets. The opportunity cost of this policy was manifested through a corresponding neglect of investment in fewer but larger and more mechanized operations in areas overlooked in consequence of their isolated locations. The failure also occurred in part because the then current regional policy dictated that economic activities should be steered away from the coast for reasons of national defence and social stability.6 Mine operations in Guizhou (Liupenshui) and Sichuan (Baoding) in the south-west can be imputed to this cause. Evidently, national and regional policies were lacking in coordination and perhaps were working at cross-purposes where mining was con- cerned. Thus mining investment was sanctioned in

‘The north-west is ranked second with 12% and the south-west comes third with 10.7%. The east, north-east and central-south, regions, coinciding with the coastal industrial zone, muster a mere 11.2% between them: see Li (1990). 6For an overview of regional policy formulation, application and shifts in emphasis, refer to Goodman (1989).

By the onset of the 1980s the energy mismatch had assumed alarming dimensions and the coastal industrial zone was clamouring for relief from the aggrava- tions engendered by shortages. In 1981, for example, the Shanghai-Jiangsu-Zhejiang belt registered a net deficit of 30.10 million tonnes (Mt) of coal, the Liaoning-Jilin belt evinced a net shortfall of 23.38 Mt, while the figure for Beijing-Tianjin- Hebei was 16.58 Mt. Particularly galling was the fact that the energy needs of the coast remained unsatis- fied despite three decades of investment in local coalfields. Clearly, a new policy was in order, one that would reject costly development of coalfields located close to markets and instead would espouse concentrating investment in low production cost, high output fields where productivity gains would more than compensate for the extra distribution costs incurred. The latter option, apart from ack- nowledging the desirability of economies of scale in mining, implicitly endorses the validity of regional comparative advantage. Adjusted to the context, comparative advantage would aver that the region with the greatest reserves of easily worked coal deserves to be favoured even at the expense of regions less well endowed. This was the cue for Shanxi’s development; for in all key respects it was demonstrably superior to other coalfields.

The case for Shanxi

It is appropriate to present a few facts about Shanxi’s coal industry preparatory to addressing its particular advantages. In 1983 output totalled 160 Mt, 67 Mt of which came from just seven mines: Datong, Xishan, Fenxi, Luan, Jincheng, Xuangang and Yangquan (Figure 1). Jurisdiction rested in a combination of central government and provincial government powers. The former, vested in the Ministry of Coal Industry (MCI), set production targets, allocated investment and provided equipment. The latter supplied working capital, oversaw labour relations and received the profits. As a consequence of reorganization instituted in 1984, control of the large mines reverted to the sole direction of the MCI while the provincial authorities settled for the direction of all others (209 local and over 3000 township mines producing, respectively, 39 Mt and 50 Mt in 1983) save for the joint management with the MCI of seven of the second tier. The division of responsibility

Resources Policy I994 Volume 20 Number 1 7


5.7% 16.6% 76.2%

48.0% 39.9% 60.8%

SHANDONG

Planned output Mt/y

3 Xiangning

0 Planned coal mine

i-4-+ Railway

- Provincial boundary

Figure 1 Development of Shanxi’s coal mines

seemed to depend on where the mine’s output was bound: if destined for shipment to other regions, the mine would fall under the tutelage of the MCI; if consumed locally (ie within the surrounding collec- tive or elsewhere in Shanxi), it would be regarded as a ward of the province. Now, with the object of showing in what light the planners saw the future of the industry in Shanxi, let us turn to its strong points.

Occupying a minuscule 1.6% of China’s area, the province presides over 26% of China’s coal reserves. More to the point, Shanxi scores when the pragma- tics of coal mining are allowed precedence. Hence, after reserves not recoverable using current technology are dismissed and the assumption of recovery ratios averaging 50% is maintained, it can be shown that a recoverable reserves to 1981 production ratio

8 Resources Policy 1994 Volume 20 Number I


a bearing on mining in the province. Management, prices, taxes and transport were all grist to its mill.

The year 1984 marked the start of the new programme with the inception of the custodian of provincial interests, the Coal Resources Management Commission (CRMC), and the transformation of the erstwhile provincial coal department into the Shanxi Coal Management District of the MCI. A fresh division of responsibility was struck between the two, but the weight of authority decidedly shifted to the centre. Administered prices, hitherto overly complicated and riddled with loopholes, were sim- plified with the intent both to stabilize them and provide incentives for greater production (detailed in Lieberthal and Oksenberg, 1988). Rather than remitting all profits to the province, a new system permitted the mines to retain profits net of taxes paid to Beijing and Shanxi (apportioned in a 55:45 split). To compensate for any revenue shortfall, Beijing waived other revenue obligations of the province. Transport posed the chief impediment to growth, however, and challenged the ingenuity of the planners. Prior to its restructuring, coal ship- ments quite simply overwhelmed the three rail lines from the province (in 1983 about 60% of Shanxi’s output left the province in this way, 10% was trucked out, and the balance kept for domestic use). A priority arrangement had been in effect after a fashion, with the largest mines having first call on the railways, the local mines grudgingly being con- ceded what little capacity remained and the collec- tive mines receiving short shrift. Under the newly established Coal Transport and Sales Corporation, a degree of order was imposed on this ramshackle arrangement after the end of 1983. This order rested on the provision of more rolling stock by the Minis- try of Railways in the first place and more effective allocation of it by the new agency in the second. Fundamental to the allocation was the granting of a larger, guaranteed share of rolling stock to provin- cially run mines. This act was indicative of the great lengths to which the central government was prepared to go in order to cement its bargain with the province and ensure coordinated development of coal mining.

of 760 applies to the province. Ratios for other provinces fall far below this level: Hebei, Shandong and Henan can manage no more than 150, Sichuan, Fujian, Liaoning and Jiangsu cannot aspire to 100, while a batch of others (Hubei, Jiangxi, Jilin, Zhe- jiang, Hunan and Guangdong) hover round 50. Quantity goes hand in hand with quality and cost- effectiveness in Shanxi. Typical heating values attest to coal quality in the province: ranging from 6000 to 7800 kcal/kg, they are strikingly better than those obtaining elsewhere.7 Cost-effectiveness can be in- ferred from a variety of measures. For example, between 1950 and 1981 first costs associated with adding coal capacity in Shanxi averaged 46.8 yuanlt, some 40% less than the national average (an advantage affirmed in 1984-90 when the Shanxi figure of 125.9 was only half the national average of 254.7). Examination of operating costs elicits comparable advantages. For instance, operating costs for Chinese coal mining as a whole in 1979 were esti- mated at 17.8 yuanlt whereas those for Shanxi were put at 14.36 yuan/t, only four-fifths of the national level. The World Bank, for its part, calculated long-run marginal production costs per tonne for 6000 kcal/kg low sulphur coal and concluded that the north (centred on Shanxi) enjoyed a distinct edge over other regions (World Bank, 1985). At costs as low as 40 yuan/t, it plainly outshone the best that the north-east (ie 45), the centre and north-west (both 65), and the south (SO) could offer. Productivity indicators also do justice to Shanxi’s claim of super- iority on the cost-effectiveness front. In 1979 the average Shanxi coal worker was responsible for 1.36 t/day; that is, an amount 40% higher than the national average.*

The Shanxi initiative

All these advantages sufficed to persuade the central government of the merits of Shanxi’s case for pre- ferential development as a coal producer; a position made clear by the State Council’s 1982 decision to found an agency committed to planning full-scale exploitation of the province’s coal reserves. In any case, complementing its anticipated function as a means for dealing with national energy shortages was its status as an interior province, one which conformed with the regional development goals according priority to decentralizing growth away from the coast. Aiming to tackle the coal expansion strategy with alacrity, the central government set about revamping every aspect of organization having

‘Culled from China Coal Industry Yearbook (1987) and Institute of Geography (1985). ‘It should be noted, however, that much as this endorsed Shanxi’s strength, it paled in comparison with what was to follow from concerted development. In 1990 the average worker productivity in Shanxi reached 2.53 t/day; by contrast. the national rate had risen to only 1.22 t/day.

Regional effects of coal mining

It is now opportune to pause and consider the impact of the coal industry on China’s set of producer regions (provinces) before returning to the special case of Shanxi. We have recourse to this approach because it furnishes us with a backdrop against which Shanxi’s performance can be assessed. In this light, Table 1 is revealing in that it confirms Shanxi’s preeminence among China’s coal mining regions. Not only does it account for a touch under 13% of national employment in the industry - bettering its nearest rival, Sichuan, by a good 4 percentage points

Resources Policy 1994 Volume 20 Number I 9


Table 1 Provincial aspects of the coal industry, 1990

Employment (X 10’)

400.8

Capital stock (yuan x 106)

8308

Output (tonnes X 106)

62.4

(5.8) 286.0

‘;;:;I

(4.4) 51.0

(4.7) 82.6

(7.6) 32.1

dZ:?

(5.6) 90.8

profit (yuan x 10”)

-107

+599

Province

Hebei

(%I Shanxi

(%I Inner Mongolia

W) Liaoning

W) Heilongjiang

!Ehui

(%) Shandong

g!an

%han

%!uan

g!zhou

(6.6) (7.8) 771.5 20060 (12.8) 220.1

(3.6) 436.0

(4.8) 526.9

(8.7) 268.6

(4.5) 485.6

4E)

(18.8) 5309

9Oii.O)

(8.5) 9788

-411

-646

-570

59;P.2) -279

(5.6) 8903

72::‘3)

-190

-264

-272 2%) (6.8) (8.4)

2716 33.7

(4.6) (2.5) 531.7 5590

(8.8) (5.2) 121.9 2150

(2.0) (2.0) 178.6 2825

(3.1) 67.9

(6.3) 36.9

3(E)

10%) (100.8)

-468

-167

-279 !Z!anxi

WI China

W)

(3.0) (2.6) 6037.0 106838 -5512 (100.0) (100.0)

Source: China’s Industrial Economic Yearbook (1991).

- but, at 286 Mt, its 1990 output far exceeds that of Sichuan (68 Mt), Heilongjiang (83 Mt) and Henan (91 Mt). Claiming about 19% of all capital stock sunk in the industry, Shanxi boasts a share twice that of Heilongjiang, the second best endowed. These biases in Shanxi’s favour have paid the authorities back in kind; for, in singular contradistinction to all other coal mining regions, Shanxi manages to register profits.

charged with inducing regional development, there- fore, is to find the best way, either by tapping domestic savings or outside sources, of breaking the vicious circle incident to capital shortages and under- development. Establish an effective means of achieving an optimum rate of capital accumulation for the region and economic development promises to be self-sustaining.

Coal mining has contributed profoundly to regional development in Shanxi in two respects: first, by attracting outside capital investment (chiefly from the central government) into the region, a phenomenon which in orchestrating a leap in regional income allowed new investments to be devoted to local needs; and, second, by bringing land into increasingly intensive use in the region as a result of the establishment of an integrated infrastructure system.’ It is generally accepted that growth in capital is the single most important factor inducing economic development during the early stages, accounting for 50% of average growth (growth in labour supply, by contrast, fails to register as a statistically significant inducement to nascent economic development). lo The first goal of any planner

‘The point regarding the stimulus to local investment that follows in the wake of central government investment is corroborated by evidence of windfall gains to provincial revenues in the 1980s as a result of coal taxes: see Ma and Fang (1991). “The seminal reference is Chenery et al (1986).

Coal is something of a godsend to Shanxi’s planners, serving as a solid base for attracting outside capital simply because it offers the region an unbeat- able bargaining counter in a nation desperate for energy. In fact, Shanxi cornered nearly 83 billion yuan of investment between 1952 and 1990, two- thirds of which came from the centre. About one- third of this investment was directly ascribable to mining (Figure 2). The rest, ostensibly independent of mining, is in large part related to it all the same. This becomes apparent when the nature of transport - particularly railway - infrastructure is scrutinized. Thus it is possible to elicit from Table 2 not only the fact that Shanxi reports greater rail freight traffic than other leading coal producers, but that far more of its traffic is coal related than is the case elsewhere. Adding railway investment to that placed directly in mining pushes the coal industry’s share in Shanxi to well above 40% of total investment in the province. If the spillovers of Shanxi railborne coal traffic were to be taken into account, the ramifications could be extended to Liaoning, Shandong and Hebei, where much of the railway development occurring in the

10 Resources Policy 1994 Volume 20 Number 1


First ‘Second ’ ’ Third ’ Fourth ’ Fifth ’ Sixth ‘Seventh

FIVE YEAR PLAN PERIOD

Figure 2 New coal capacity in Shanxi relative to China

30-

1980s was bound up with transferring Shanxi coal to ports for coastwise distribution. The 652 km long Datong-Qinhuangdao railway, one of the cardinal projects of the whole Shanxi development scheme costing six billion yuan, is symbolic of the mine to port nexus not officially included within Shanxi’s capital investment returns. Indeed, we could go on to argue that much of the impetus to develop China’s ports in the 1980s - and Qinhuangdao alone is on a par with the largest coal ports anywhere - stemmed from the desire to promote Shanxi as the nation’s energy repository. At any rate, this point is incon- testable: transport infrastructure, led by rail but embracing marine facilities too, has been perceptibly

moulded throughout China by coal developments in Shanxi in recent years.

The advent of a growth pole is an eagerly awaited outcome of concentrated investment in coal mining because, as we were at pains to establish earlier, its existence can be used to compensate for the negative externalities which mining invariably throws up. Growth poles, unfortunately, are circumscribed by problems of definition, tending to be open ended in laying claim to constituent parts. The resultant profligate demands on data to affirm their scale and scope defy easy solutions in the West, let alone a developing region like Shanxi. Rather than trespass into this larger arena only to be thwarted, our object

Table 2 Railway dependence on coal traffic, 1990

Province Rail density (km/area)

Annual increase in system extension (%, 1981-90)

Freight traffic (tonnes X 106)

coal (% of traffic)

Shanxi 1.488 1.4 230.82 87 Liaoning 2.427 0.9 141.00 22 Shandong 1.293 2.3 80.12 38 Hebei 1.576 1.6 110.97 34 Henan 1.260 0.1 84.13 62 Heilongjiang 1.099 0.0 131.26 47 Sichuan 0.509 0.0 61.79 37 China 0.558 0.7 1462.09 43

Source: China’s Communications and Transportation Statistics Yearbook (1990).



Table 3 Income and employment multpliers for Sbanxi, 1987

Sector

Agriculture Coal mining Crude oil and natural gas Metal ore mining Non-metal mining Food industry Textile industry Clothing and leather Wood and wood products Paper Power and heating supply Petroleum refining Coking Chemicals Building materials Primary metals Metal products Machinery Transport equipment Electrical machinery Electronic equipment Instruments and meters Machinery repair Other industries Construction Transport and communications

Income

1.36 1.59 1.21 2.13 1.34 9.27 6.34 4.95 2.87 3.32 4.74 7.77 3.45 4.00 1.91 3.76 2.71 2.66 3.14 3.45 3.43 3.18 3.12 1.89 2.18 14.80 4.39 8.89 2.24 2.23 2.11 1.37

Multipliers (Type I): employment

1.27 1.65 0.00 3.76 2.42

24.35 9.77 6.26 3.42 2.79 4.38 4.33 3.28 4.28 2.74 4.16 2.86 2.55 2.35

1.77

will be limited to ratifying the connection between Shanxi’s overall economic well being and the pre- sence within it of activities which can be justifiably taken as representative of a growth pole. Recourse to an input-output table drawn up for the Shanxi regional economy as it existed in 1987 is quite rewarding in this respect. Such a table permits us to derive multiplier estimates for a host of sectors, many of which owe their genesis and well-being to strong linkages with the coal industry.” A glance at Table 3 is sufficient to show that manufacturing as a whole easily eclipses coal mining in the multiplier stakes, consigning the latter to a relative position scarcely better than agriculture. Some individual manufacturing industries, such as those occupying the metallurgical and machinery spectrum, bear obvious affinities with mining and, for good measure, record respectable income and employment multipliers. The magnitudes of these multipliers, however, pale in comparison with those attending the likes of food processing, textiles and clothing, all of which enjoy only tenuous links with coal production. Evidently, the industrial base or enlarged growth pole in Shanxi is a comprehensive entity, embodying, as we would expect, traditional downstream activities centred on an iron and steel industry (and, geographically, the city of Taiyuan stands out as an example), but encompassing besides a less

i*Details concerning the table and compilation of multipliers can be found in Lei (1990).

obviously linked ‘light’ group revolving round the manufacture of food and textiles. The related and not so related complexes complement each other, with the light end employing much of the workforce _ especially female - unsuited or otherwise surplus to the needs of the downstream complex.

Of course, it is one thing to attach importance to industries according to the size of their multipliers; it is quite another to rank them on the strength of their contributions to actual regional employment. Re- garded from the altered vantage of shares of absolute employment, for instance, the light complex is decidedly less impressive. Textiles, for example, accounted for only 7.4% of provincial employment in 1990 whereas two constituents of the downstream complex, metal working and machine building, between them engaged 28.2%. The coal industry’s share of absolute employment, by comparison, amounted to 31.1% : testament, once again, to its continuing overriding importance to the regional economy. What will not go unnoticed, though, is the observation that coal mining and the downstream complex (ie a combination that can be envisaged as a traditional growth pole) together answer for the lion’s share of job opportunities in Shanxi. Should we be disposed to add the light complex to the nexus of activities which ultimately rest on the prosperity of the coal industry, then the relevance of the growth pole to the economic development of the region looms larger still.

Conclusion

There is no escaping the fact that modern mining must shoulder the burden of a severe image problem, one which leads regional planners to hesitate in proposing its use as an instrument of development. To be sure, much of this jaundiced perception is undeserved, smacking of the sins of the fathers visiting the children. No matter how often contem- porary mine managers proclaim their sensitivity to the concerns of the districts hosting them, they continue to be tarnished by ignominious precedents dating back to the Industrial Revolution which left much to be desired on the score of community advancement, balanced economic development and attention to the environment. Despite this legacy, mining has much to recommend it as a catalyst in regional rejuvenation provided certain safeguards are observed. Those safeguards address the pollu- tion issue, reassure affected communities of the mining enterprises’ long-term commitments to their locales and, last but not least, restore the faith of planners in the growth pole by demonstrating how mining can benefit local related and not so related economic activities.

For a variety of reasons, most notably the persist- ence of a command economy with its corollary of imperative planning, China can be singled out to

12 Resources Policy 1994 Volume 20 Number I


create a new set of undesirable outcomes, ranging from dependence on imported energy with its con- comitant of limited control over prices (to say no- thing of transferring the externality problem over- seas) to reliance on dispersed, smaller-scale coal mining operations with their accompanying cost penalties.

illustrate how modern mining can fulfil a vital role in regional development while, at the same time, discharging a larger obligation of pandering to a national goal striving for energy self-sufficiency. Provision was made from the very beginning of the Shanxi coal development scheme of the 1980s for a novel form of coordination which melded direction from the centre with explicit recognition of regional benefits and, along with it, encouraged genuine participation by local planners in the programme’s implementation. This approach, a conspicuous de- parture from past practice in China, attempted to strike a balance between central government, representative of outside, albeit national, interests and provincial government, the protector of local community interests. As such, it implicitly acknowledged the conflicts of interest always latent between these two parties and, to its credit, sought to prevent such conflicts from flaring up. The prospect of mutual gains reconciled each side to cooperative development and this leaning was buttressed by the knowledge that these gains were likely to endure for a protracted period. Since domestic markets promised to grow substantially for the foreseeable future and granted that Shanxi offered a virtually unlimited supply of competitively priced energy, the expecta- tions of long running gains by the planners were perfectly reasonable.

Less well founded was the assumption that, as a matter of course, the coal industry would give rise to a growth pole, compounding regional benefits. In truth, Shanxi has garnered a sizable manufacturing structure over the years and circumstantial evidence hints at the connection with coal mining. However, conclusive evidence for the nexus is wanting, and the nature (and extent) of leakages from the regional economy remains an open question. The same un- certainty surrounds the issue of negative externalities and the ability of Chinese planners to manage sustainable development which abides by acceptable norms of environmental protection and restoration. Indeed, the Shanxi scheme may have sacrificed some environmental standards in the headlong rush to institute comprehensive development. Yet the opportunity costs are probably elusive. Forsaking the Shanxi scheme for other options would probably

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Documents

Regional policy grounded in minerals exploitation: A Chinese example