Research On Chinese Coal Price Distortions Based On The Perspective Of Market Forces

Since reform and opening up, the economy has maintained rapid growth in China, andthe energy consumption has also been rising with the rapid growth of economy. The coalmining and the electric power play the pivotal role in the economic development in China,and they have made a significant contribution to the industrial development. Due to thespecific national conditions in our country, it has formed the pattern of “the market coal” and“the planned electricity”, and the coal mining enterprises and the power enterprises have beendisputing over the price of thermal coal for a long time.The coal mining industry has achieved market-oriented in China, but compared with themajor coal producing countries, the concentration of coal mining industry is at a very lowlevel. According to the industrial concentration partition from Bain (USA), the coal miningindustry in China belongs to the scattered competitive industry, and it is the price taker. Themarket structure of electric power industry is the monopolistic competition, which has a muchhigher industrial concentration. Being monopoly, the power enterprises, which are thedownstream in the production chain, force the coal mining enterprises, which are the upstreamin the production chain, lower the coal price, resulting in the serious distortion of the coalprice.According to the problems of the coal mining industry and the electric power industry inChina, taking market force as the entry point, this paper will use the theory of industrialorganization based on the related research at home and abroad. By the detailed review ofdevelopment process of the coal mining industry and the electric power industry in China, thepaper makes the qualitative analysis for the relationship between the coal price distortion andthe market force of the coal mining industry and the electric power industry. Then, bytheoretical modeling, the paper makes the analysis for the effects of monopsony force on theprice of intermediate inputs in the coal-electricity industry chain. Finally, by econometric test,we believe that the market force is the key factor caused the coal price distortion, and the coalprice distortion is positively related to the concentration of the power industry, negativelyrelated to the concentration of the coal mining industry, and that increasing the concentrationof the coal mining industry to offset the market force of the electric power industry is animportant means to reduce the price distortion.