CHINA TO SLASH COAL PRODUCTION AS LOSSES RISE

CHINA TO SLASH COAL PRODUCTION AS LOSSES RISE

With 130 million metric tons of coal on hand and sales flagging, China has made it official: It plans to slash output this year.

Official statements Sunday described an ''astonishing'' glut arising from uncontrolled production by smaller township and village coal mines.An official from the State Coal Industry Bureau was quoted by Business Weekly as saying production would be cut by 70 million tons this year, and up to 150 million tons in the next two to three years.

China is the world's largest coal producer, cutting 1.33 billion tons last year. Consumption was 1.29 billion tons.

Exports by China National Coal Import & Export Group, the largest entity, came to 27 million tons last year, up 4 percent from the previous year.

Official statistics show losses in the first quarter of this year at key state pits amounted to $184.3 million, on top of $209.6 million in the 1997 period.

The smaller mines run by townships and villages produced 581 million tons of coal last year, 43.6 percent of the country's total. China has 104 state mines, 2,500 local state-run pits and 75,000 township and village sites.

Officials have wrestled for years to close or at least supervise the smaller pits. Output there has been growing much faster than at the big state mines; they are also most commonly the site of accidents that kill many thousands of miners each year.

A new coal law went into effect at the end of 1996 intended to regulate development of township and village mines. It stipulates that producers must obtain a mining license and production permit from the government, but evidence suggest that is widely ignored, with up to a third or local pits operating illegally.

WILL 'RECTIFY' SMALL MINES

The State Coal Industry Bureau ''has made up its mind to rectify small coal mines completely this year, laying out a sound foundation for healthy development of the sector,'' a spokesman said.

Coal has been China's main source of energy for decades. But increased use of hydroelectric, nuclear, oil and natural gas options and tougher pollution laws, are gradually whittling down consumption.

BEIJING-AREA BAN

Authorities in Beijing said earlier this year they will ban the burning of coal in 40 square miles of the capital's central districts by 2000 to reduce pollution. Natural gas will be piped in as a replacement.

As reported, the government is offering loans of up to 3 billion yuan ($360 million) and higher rebates to encourage exports.

The country has earned $5.4 billion by exporting 150 million tons of coal over the past five years. Such sales, however, amount to only about 6 percent of the world's total coal trade.

China plans to export 35 million tons of coal this year, and 50 million tons by the year 2000. At that time, demand is projected at 1.48 billion tons, of which 1.43 billion will be consumed domestically.

It is anticipated that 600 million tons will be used by the power industry, 125 million tons in metallurgical plants, 95 million tons by the chemical industry, 115 million tons for building materials, 90 million tons in transportation and for export, 135 million tons by light industry and 90 million tons by urban residents.

OVERSEAS FUNDING

Overseas investors are being sought as part of the revamping of the industry, which edged into the black briefly last year for the first time in decades.

State-owned No. 2 Coal Mine in northwestern Xinjiang wants a partner to help with technical renovation to boost annual capacity from 60,000 tons to 150,000 tons. The project, estimated to cost 22 million yuan, will seen that repaid in just over six years, officials say, with a 16 percent rate of return.

The coal agency plans to transfer to local areas the management of 94 state-run mines whose financial affairs come directly under the central government.

Zhang Baoming, director of the coal administration, said this would help get government out of the business, spur coal enterprises to enter the market, exploit new coal resources, and make local government pay more attention to the industry.