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Why Is It So Hard to Remove Our People’s Blood from the GDP?

Chinese economist discusses the reasons behind the sky-high fatalities associated with China’s mining industry.

Since October 2006, the frequency of mining accidents in China has been inordinately high. In October and November alone, there were 22 mining accidents, with 322 deaths. [1] Ironically, the six ministries, including the State Administration of Work Safety and the Central Committee for Discipline Inspection, had just announced in September that the investigation of illegal deals between power and coalmine businesses had made some preliminary headway.

Two factors suggest that it is questionable whether the Chinese government’s pledge of "Cleansing the bloody coal and bloody GDP," has been truly effective. One is the frequent mining accidents; the second is the central government’s issuance in June 2006 of the "Draft Law on Emergency Response," in which it ordered a tight control of the media’s reporting of major disastrous incidents.

Behind the Pledge to Cleanse the Bloody GDP

China’s notoriously fatal mining accidents in the past few years, with the numerous resultant deaths, prompted the authorities to investigate. Even according to the highly underestimated official numbers, during the period of 2001 to October 2005, there had been 188 major coalmining accidents in which 10 or more people died, or an average of one such accident every 7.4 days. There were 28 mining accidents involving 30 or more deaths during that period, or one every 50 days. [2] The media has frequently criticized the miner’s dire living conditions, where they lead slave-like lives, and hover between life and death. Due to the continuous appeals for a change in the miners’ working conditions, the authorities were forced to investigate the ever more serious issue of mine owners colluding with local government officials. In April 2005, Li Yi, the Director of the State Administration of Work Safety, led a nation-wide effort to "cleanse and correct the situation in which government staff and executives of state-owned enterprises invested in the coal mining industry." In September 29, Li Yi made a bold statement in front of the 36 major local officials in charge of work safety, "We must have the determination to enter this ‘hell’ (the coalmine industry) before anyone else (to inspect work safety)," and "(referring to those who are accountable) if they are the CCP members or government officials, we must penalize them and remove them from their posts; if they are professional managers, we must fire them and disqualify them from this profession; if they are rogue mine owners, we must bankrupt them and force them to lose money." [3] The pledges to "clean up the bloody GDP" remind the audience of the famous pledge made by the former Premier Zhu Rongji, "I’ve prepared 300 coffins, 299 of them are for corrupt officials, and the remaining one is for myself." Unfortunately Zhu’s anti-corruption determination in exchange for his life failed miserably. Today if the determination of Li, who is lower in rank and in power than yesterday’s Zhu, falls through, no one will be surprised, either.
In the one plus year of investigation, the original deadline has been postponed again and again. The central government directly dispatched two groups of investigators. These groups have been stationed in 14 major coal-producing provinces, declaring their goal to be figuring out who owns the coalmine’s stock. Even with such a hardline approach, the investigation could not conclude until September 2006, when the six government departments, including the Central Committee for Discipline Inspection and the State Administration of Work Safety, collectively called a news conference to announce the "victory of the first war" in the investigation. According to the announcement, the verification and process of identifying the people to be disciplined have been completed. Nationally 5,357 people were reported to the higher government bodies, including 4,023 government staff members and 1,334 state-owned enterprise executives. A total of 755 million yuan (US$94 million) as their investment in the coalmines were reported, and of which 709 million yuan (US$89 million) or 93.9 percent had been divested from the coal mines. [4] From July 2006 to December 2006, the authorities halted the production of 12,990 coalmines as a result of their problems. As of April 7, 2006, 5,931 mines had been closed. The 26 provinces, autonomous regions, and cities all accomplished or surpassed the goal of closing the problem mines. [5]

Nevertheless mining accidents have not stopped embarrassing the Chinese communist government. As soon as the celebration conference ended, in less than one month after the government declared victory in the coalmine investigation, mining accidents, like a ghost, occurred one after another.

The Biological Chain of Coalmine Corruption Spreads Across the Country

As a matter of fact, while the authorities declared victory in its fight against coalmine problems, they reluctantly acknowledged that the work of rectifying the coalmine industry was incomplete. The issue of "one certificate for multiple mines" persisted; the coalmines that were suppose to be closed were retained in the name of resource consolidation; and that in some areas, many small coalmines were consolidated into a large enterprise in the name of mine consolidation. The root cause for the rectification’s inadequacy is very clear. It is because wherever there are coalmines there is corruption in the form of coalmine owners colluding with government officials.

In China, mineral resources belong to the state. Under China’s current system, wherever there is a shortage or a monopoly, there will be a biological chain of corruption. Due to China’s severe shortage of energy resources in the past few years, numerous gigantic biological chains of corruption have formed around coalmines.
Such a corruption chain involves the following types of people: the top level officials who have the power to issue coalmining rights, all the local government officials who can insert their hands into the industry, coalmine owners (a.k.a. coal bosses), and miners. Unlike the energy development system in nations that have a market economy and democracy, the coalmine industry in China has two additional parties [local and higher level officials]. That is why we see all the Chinese-style stories.

In the world’s market economies, the business owners first obtain the ownership of a mine. Then they hire workers to mine it. The energy price in the market and the business costs (including the labor cost) together with the supply and demand relationship determine the profitability of the business. In addition, the labor cost depends on the average standard of living, the minimum wage stipulated by law, the labor supply and demand, and the power of labor union, etc.

Mining rights in China, however, belong to the state, which is an abstract entity. Government officials represent the power of the state. As a result, mining rights become a bargaining chip in their money-power deals. There are numerous government departments and government officials in China. Knowing that they may get into trouble by gaining the interest alone, the officials usually distribute the fat they get equally by making deals among themselves. Anyone who is even remotely related to the mines will attach himself to the biological chain of corruption, sometimes including those from the powerful government departments that can control the mine developer or the franchiser. As a journalist familiar with the coalmine industry in Shanxi Province put it, "There are 27 government departments and organizations that can have their hands in the coalmines. Since it is relatively easy to discover naked cash bribery, those officials then creatively reflect their interest in "stock ownership" of the mines. The creative varieties of ownership structures make it difficult for outsiders to straighten out the maze.

How Government Officials Eat the Coalmines

The his speech of November 1, 2005, Li Yi, Director of State Administration of Work Safety, openly acknowledged, based on his staff’s research, that the root cause of the coalmine owners colluding with officials is the money-for-power deal, which takes the following forms: [6]

1.The government officials and state-enterprise leaders make illegal profits in the form of stock ownership. Case study: while investigating the July 11 (2005) coalmine accident in Fukang, Shenlong of Xinjiang Province, the investigators discovered that a vice mayor and some executives in the state-owned Hami Coalmining Group had a vested interest in the mine in the form of stock ownership. Some of them received free stock, and others received dividends.
2.Some government officials illegally own the mining businesses themselves or hide their ownership by vesting it in relatives’ names. For example, the owner of the Xinfu (New Rich) mine in Qitai River City of Helongjiang Province, where a major accident occurred on March 14, 2005, turned out to be Peng Guocai, who was the associate director of the Administration of Work Safety in Taoshan District of the city. Peng owned the mine along with his brother who was the Vice President of the Quality Coal Group of Qitai River City.

3.Government officials abuse their mining approval power and take bribes from mine owners. Case study: a preliminary investigation showed that the Daxin Mine, where the fatal August 7 (2005) accident killed 123 miners, obtained a safe production certificate on June 5, 2005, by bribing Hu Jianchang, the associate director of the Administration of Work Safety of Guangdong Province.

4.Sheltering and winking at illegal coalmining businesses and operations. A case study: On March 17, 2005, a gas explosion at the Sulongsi Mine of Fengjie County, Chongqing City, killed 19 people. Despite an order that the Administration of Work Safety of Chongqing City and the Bureau of County Coalmine Industry issued in February to halt the coal mining in order to rectify the mine’s safety problems, Huang Xing, the mayor of Xinzhen Township, allowed the mine to resume production after taking the mine owner’s bribes, causing the catastrophe.

5.Officials are directly involved in covering up the incidents after they occur. Case study: In July 2, 2005, 36 people died in a gas explosion at the Jiajiabao Mine of Ningwu County, Xinzhou, Shanxi Province. The director of the Ningwu County Bureau of Coalmine Industry conspired with the heads of the Mine Rescue Brigade to report only 19 of the deaths while covering up the remaining 17 deaths. Li Tianeng, the Vice CCP Secretary of Ningwu County, and Li Deshen, the Vice County Mayor approved the cover-up. They even shipped the 17 corpses to Inner Mongolia.

Why Do the Government Officials Protect the Coalmine Owners?

The reason that officials protect the coalmine owners is because they have a tremendous vested interest in the mines.

Despite the campaign-like investigation that the four state ministries launched and the State Administration of Work Safety led, and despite the severe warning of "withdrawing your investment or get fired," many officials tried hard to fight back because of their tremendous ownership interest in the mines. Some shifted their stock ownership to their family members or relatives, while others pledged to withdraw but never actually acted on their pledge. Even with such a tremendous political hurricane, none of the government officials in Inner Mongolia pledged to give up their stock ownership in the mines.
As a mine boss revealed privately to a journalist, the local government officials swore that they would rather get fired than give up their stock ownership (in the mines). According to him, an investment of 200,000 yuan (US$25,000) into the mines could yield at least the same amount as dividends each year.

Such a high return is certainly not achievable from the normal coalmine operation. In fact, local coalmine bosses are willing to feed the officials with so much fat because they need the officials to form a common interest group. The officials provide the shelter for the mines while the mines become the money cows for the officials. The local officials stock ownership mostly comes from free stock shares (as special dividend). The officials’ names do not appear on the list of the stockowners. As long as there is no whistle blower, these officials are safe.

At the Expense of Miners’ Lives

While the officials can hide in the dark while they receive a high return from administering the mines, the coalmine bosses’ wealth is not easy to hide. Hu Run, a young man who compiled a list of the Wealthiest, mentioned in his new book, China’s Energy Riches, that one third of the wealth in the field of energy belongs to Shanxi mine owners. This reflects how much profit there is in the coalmining industry. There is even a saying in the coalmining provinces, "Opening a small mine is like getting a money-printing machine." [7]

Of course, the mine owners cannot pocket all the cash this machine prints out. In particular, for franchisers, they have to keep the enterprise profitable and hand in the franchise fees. They also have to pay enough dividends (or bribery) to the officials. As some mine bosses estimate, for every dollar they make, they have to use nearly half for "networking" (guanxi in Chinese), including the officials, and journalists who extort the money from them in exchange for not exposing the problems in their mines. There are only two ways remaining to squeeze more profit. One is the miners’ working environment; the other is the cost of labor itself. Consequently, Chinese miners are notorious for being in the most dangerous and most miserable profession in the world. Firstly, they work in an extremely poor environment, lacking almost all safety measures. Secondly they make a very low income. The following provides an estimate of the mining cost allocation in different forms of businesses. In 2004, one ton of average coal initially sold for 270 yuan (US$35). By the end of the year, the price increased to 400 yuan (US$50). The mining cost at some state-owned mines was estimated to be 133 yuan (US$17) per ton, while that number shrank to merely 40 yuan (US$5) in the private mines. The cost savings came from miners’ wages and benefits; that is, these savings were closely related to the miners’ lives. The bribery that mine bosses gave to government officials and other parties, who appeared in the books as "stockholders," came right from the reduced "life expenses" of the miners. [8]
The Ice-Cold Death Tolls

Since the Chinese communist government does not allow labor unions to exist, as the supervisor, the government should assume responsibility for the protection of the laborers and for inspecting all of the mines for safety. Because the officials-in-charge all own stock in the mining businesses, such an inspection has become a mere formality. As a result, China has naturally become the country with the most mine accidents. The annual number of deaths and injuries in China exceeds every other country in the world.

Deaths in China’s Mines

 Year  Mining Deaths
 1990  10,315
 1991  9,777
 1992  9,683
 1995  10,572
 1996  9,974
 1997  7,083
 2000  5,798
 2001  5,670
 2002  6,995
 2003  6,702
 2004  6,027
 2005  5,491

The above death totals come from official statistics, but they are much lower than the true number of deaths. A government department reportedly claimed at the beginning of 2004 that the number of deaths in China’s coalmines in 2003 was 6,702, which was 293 fewer deaths than, or a 4.2 percent reduction from the number for 2002. They tried to establish a 4.0 percent reduction rate for the number of deaths in 2004. The death rate per million tons of coal was 4.17 in 2003, a 16.6 percent decrease from the prior year. They planned to control the number to make it within 3.8 in 2004. Since the numbers are under strict government control, their authenticity is apparently questionable. ANSA, the Italian new agency, reported on August 29, 2006, that there were 16,000 accidental deaths due to work safety problems in China annually, [9] approximately eight times the official number of just over 2,000 deaths from accidents.
Even the deaths and the death rate from the government-controlled report are horrifying. While 35 percent of the world’s coal production in 2004 came from China, the number mine deaths was 80 percent of the world’s total. On average 15 deaths occur in China every day. Its death rate per million tons of coal production is 30 times that of South Africa, and 100 times of the United States. In contrast, one miner in China produces 321 tons of coal, or 8.1 percent of the per-miner production in South Africa, or 2.2 percent of that of a U.S. miners. [10]

It is a grave situation because it is not only China’s coalminers who face such miserable work conditions; the workers in other mining industries face the same problem. In 2000, the death toll in China’s mining industries totaled 11,681, which was 252.4 times Japan’s deaths in that same year.

The Chinese Regime’s Indifference to Life

There have been many discussions about the cause of China’s frequent mining accidents.

The first important reason is the lax rules against mining where there is gas. Nationwide, the high risk from gas in mines in the mid to large state-owned mines is very grave. China has nearly 10,000 mines with high-levels of gas; that’s 30 percent of all the coalmines in China. Take the Zhenzhou Coalmine Group as an example. It is a subsidiary of the Daping Mine Institute of Henan Province, where an accident with the enormous death toll of 148 occurred last year. 40 percent of the mines this company owns have high levels of gas. Niu Shenying, President of Zhenzhou Coalmine Group, once told a CCTV journalist that nearly half of their mines have gas outbursts, and 40 percent of its coal production comes from these mines. "If we shut down all of these mines, China’s current shortage of coal, electricity, and oil will get much worse. As a matter of fact, many mines with high levels of gas have long since been gas outburst mines. In order for them to be available for mining, these gas outburst mines are instead labeled as high gas mines. For example, the Daping Coalmine in Henan Province had not been labeled as a "gas outburst mine" until the severe mine accident last year." [11]

The second reason is the low investment in safety in China’s coalmining industry. According to a survey by the State Administration of Work Safety, as of 2004, there was a 50 billion yuan (US$6.3 billion) shortage of safety funds among the main state-owned coalmines. The accumulated safety shortfalls undoubtedly became a serious risk for many coalmine companies. According to inspection results, however, even in the state-owned mid to large mines that had major accidents, the safety protection facility is superior to the mines at the county or township level and to the private mines. It has been reported that there are about 28,000 mines in China, 25,000 of which are small-scale mines. Seventy percent of China’s major accidents in the past few years occurred in these small mines. [12] {mospagebreak}
Exchanging Life for Food

Every day of his life, a coalminer faces darkness, dampness, noise, coal dust, impending dangers, and a heavy workload. As the coalminers describe their own lives: "miners are the meat squashed between rocks." With the lack of proper safety measures and facilities, the five major life-threatening causes for mining accident—water (flooding), fire, gas, coal dust, and cave-ins may happen at any time.

Yet the miners have no other choice, because the problem of starvation is more pressing than the risk from entering the mines. Coalminers almost exclusively come from the poor countryside. To survive, they have to work where there are risks. They exchange their lives for foods. Before they become miners, they have to sign a life-or-death contract with their mine bosses. A couple of years ago, China Youth Daily disclosed the contents of such a contract for the Chener Gold Mine of Luonan County, Sanxi Province:

"While in production, Party B (the miner) must protect his own life. In case of death, injuries, or any other accidents, Party B must be fully responsible for himself, while Party A (the Mine’s Administration Side) is not responsible for any consequences." "Any safety related accident, fire, human error related accidents caused by Party B, or illnesses during work in Party A’s work site, or any other abnormal death, is all Party B’s responsibility." [13]

This is truly a life-or-death contract. However, in a country where job opportunities are scarce, 90 percent of the farmers have to choose between poverty and starvation on the one hand and risk and a short life on the other. For example, since the main source of GDP in Guangdong Province is not from coalmining, Guangdong’s government decided a few months ago to close all of its small coalmines in order to eliminate the complex administrative work. Not only did the coal bosses worry about the consequences; so did the miners who lost their jobs. Before they can live better, they have to survive.

While claiming to be No.2 in the world in terms of its GDP, China is "drinking poison to quench the thirst," in order to support its resource industry for its economic development. Can such a bloody GDP bring its people prosperity, or world peace?

Most important of all is that China’s corruption has itself become a systematic and fatal disease. While the political elite are widely accumulating their private wealth by taking advantage of their power, how can the Chinese people, with no power, expect their local government officials to give up the resources that are already in their hands for the good of all?

1., December 4, 2006
3., July 11, 2006
4, China Economic Times, September 29, 2006
5., December 4, 2006
6. "Section level official withdrew seven million Yuan of investment – giving up money cow and becoming the assistant District Chief," China Energy Net,, November 3, 2005.
7., November 3, 2005
8. Southern People Weekly, "The Truth of Coal Bosses in Shanxi Province,", October 27, 2005
9., September 2, 2006
10. Xinhua: "Li Yizhong: Four Major Safety Criteria will be implemented and inspected soon," Shanghai Equities, April 1, 2006,
11. "Visiting the mining life in Daping Mine in Henan," China Energy Net, News Investigation, June 23, 2005,
10. "Visiting the mining life in Daping Mine in Henan," China Energy Net, News Investigation, June 23, 2005,
12. Same as above
13. "The Politics of Mine Accidents in China" Politicians, February 17, 2005,

Qinglian He is a renowned econpmist/journalist from mainland China.