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China's mines putting profit ahead of safety

As officials announced Wednesday that 166 miners died coal mine fire in western Shaanxi province, the disaster-prone industry has again come under scrutiny for practices that put profits far beyond the safety of its workforce. NBC's Eric Baculinao reports.
Chinese rescuers emerge from the underground tunnel in Chenjiashan
Chinese rescuers emerge from the underground tunnel in Chenjiashan Coal mine Tuesday.Xinhua / Reuters
/ Source: NBC News

As officials announced Wednesday that hope was lost for dozens of Chinese miners trapped underground in a coal mine in western Shaanxi province, the disaster-prone industry has again come under scrutiny for practices that put profits far beyond the safety of its workforce.

The Chenjiashan Coal Mine disaster ranks as one of the worst mining accidents in China in a decade, and comes on the heels of the explosion in Daping coal mine in central China’s Henan province a month earlier in which 148 workers were killed.

In both cases, they were preceded by accidents that were never adequately addressed, as mining officials focused on increasing coal output to fuel China’s breakneck economic growth.

The state-run Xinhua news agency reported Wednesday that four officials have been arrested for not taking action to prevent the blast in Henan.

And, according to local media reports, the deadly fire Sunday at the Chenjiashan mine may have been caused by management’s blind pursuit of a $50,000 year-end bonus to reward extra-production.

Pushing the workforce
About a week before the tragedy, another blaze broke out in the mining shafts and the gas density remained at dangerous levels even after the fire was put out, according to Chinese investigators. But the mining officials decided to continue operations, even threatening reluctant workers with pay cuts and dismissal, local media reports said.

“If they had stopped production and ventilated the shaft to reduce the gas density, the Sunday explosion wouldn’t have occurred,” a village party secretary told China Daily  newspaper.

On Wednesday, the state-owned news agency Xinhua reported the inevitable. “The spokesman for the mine just declared all the 166 miners were killed,” confirming what authorities had been expecting in the days since Sunday’s accident.

“The Chenjiashan disaster was a management problem,” a safety inspection official who gave his name as Miao told NBC News.

According to Chongqing Morning Post investigative reporter Hu Yong, the director of Chenjiashan coal mine was promised nearly $50,000 for 400,000 extra tons above the planned annual quota, or 12 cents per additional ton. The planned output of 1.8 million tons was already fulfilled by the end of October.

For each of the last two months, 200,000 tons in output had to be achieved, against the average monthly production of only 180,000. “If they stopped production due to the fire, their bonus would be gone,” Hu said, quoting a mining safety office employee.

“The mining director only saw the money and didn’t care for human life,” the wife of one of the miners told Hu.

His expose has touched on the complex economic roots and forces behind China’s mining disasters. 

Against the backdrop of an energy crunch that threatens China’s rapid economic growth, coal mining has become very profitable in recent years, with prices rising by about 20 percent last year and more than 50 percent this year, and there’s tremendous pressure to keep up output in line with government’s directive.

The $50,000 bonus promised Chenjiashan’s mining director by a higher mining administration bureau appears to be completely in line with the government’s drive to prevent the power shortages that have hit more than half of China’s provinces, including important industrial bases like Shanghai.

The push for production occurred even as the government has allotted $480 million to improve mining safety and set up surveillance bureaus in China’s five major coal producing provinces.

Energy needs
Coal has remained the cheapest, most abundant and dependable fuel, supplying nearly 70 percent of China’s energy needs. Oil provides about 20 percent of China’s primary energy consumption, but the spiraling world prices have reduced China’s room for increasing oil imports.  It is already the second-biggest oil importer after the United States.

Since 1999, China has launched a campaign to close down numerous small, highly polluting and dangerous coal mines, with 11,822 mines shuttered in 2001 alone.  But these small mines used to produce close to half of China’s coal output.

With the leap in coal prices due to domestic energy shortages, partly aggravated by China’s increasing coal exports, owners of hundreds of illegal dangerous small mines resumed production despite risks of prosecution.

China still has some 30,000 coal mines, big and small, with ready access to cheap labor provided by unemployed workers from bankrupt state industries and “surplus” farmers from villages. The average miner’s salary is about $120 a month. 

Every year, these coal mines would hold pricing negotiations with China’s monopoly State Power Corporation, which was broken up in 2002 into five similarly-sized power giants.  The combined purchasing power of these power giants has always resulted in “preferential” coal prices in their favor, as the government, faced by inflationary pressures and two electricity price hikes, is unable to completely introduce market pricing for coal, despite its decision to do so in June 2003.

The result is an anomalous double-tier pricing that still depresses the true price of coal, and reduces the profits and benefits that would have gone to improve the conditions of the coal mining industry and its mammoth workforce. Thus, while there has been a doubling of profit rate in the coal mining industry over last year, it is still just half of the overall industrial average.

Deregulation fears
Pu Hongjiu, vice-chairman of China National Coal Association, has lamented that China’s power giants obtain their coal at $18.8 per ton, which is about $6 less than the market-determined price paid by other users.

But there’s strong opposition to coal price deregulation. “If we open the price, what shall we do if there is a drastic wave in the market and national economy?”  asked Wu Yin, a top energy official,  in a Xinhua news dispatch.

The economic distortions and the massive surplus labor that is susceptible to abuse appear to be important cause of the mining disasters 

“With no other livelihood available and with little education or training, many rural workers are willing to work for cash in appalling and unsafe conditions, often assisting coal mine owners in avoiding safety procedures to insure continued employment,” observed Hong Kong-based China Labor Bulletin.

China produced 35 percent of the world’s coal last year, but it accounted for 80 percent of the world’s coal mining deaths.  Its death rate for every 100 tons of coal is 100 times that of the United States. 

“Any rush to big profits should not be greater than respect for human life,” pleaded Zhang Tianfu of Beijing Youth Daily. “In our modern society, this should be the bottom line.”