Wealth of coal magnates declines as industry slumps in China

August 22, 2013 Leave a comment

Wealth of coal magnates declines as industry slumps in China

Staff Reporter

2013-08-22

Liu Xuming’s name was once considered synonymous with an express ticket to wealth due to his position as a coal mine owner in Shenmu county in northwestern China’s Shaanxi province. But his name is now associated with fraud and lost profits after coal prices in the country slumped.

Liu is being held at a detention center in Shenmu on fraud charges. The 30-year-old allegedly collected funds from investors to be channeled into coal assets, but was unable to pay them back due to the slowdown in the county’s coal industry. Thousands of protesters gathered in front of the county’s government building on July 15 after rumors circulated online that Liu had fled the country.According to public data, 59% of Shenmu’s land sits on coal reserves, whose reported production capacity was estimated at 50 billion tonnes. As a result, the local government had been offering 15 years of compulsory education free of charge on the back of strong tax revenues generated from the industry. In 2009, it also began offering free medical services, becoming the first county in China to provide such benefits.

Over the past decade, more than 2,000 people had become incredibly wealthy owing to their coal investments, of whom Liu was one. But since the drop in prices because of oversupply, local courts in the county had received lawsuits related to 4,786 disputes involving private loans. The collective disputed was calculated to be more than 10 billion yuan (US$1.63 billion).

More than 200 coal mine owners in the county have been declared missing since the end of 2012.

The local government’s policy to integrate all private mines into state-owned mines beginning in 2010 had also directly cut the revenue source of private mine owners. According to Shenmu police, the amount of money involved in Liu’s disputed cases is 787 million yuan (US$128 million).

Filed under Macro Trends

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