China's Coal Industry: A Great Investment Opportunity?

By Patrick Hu and Gilbert Zeng

Website: www.jonesday.com

Foreign investors' access to China's coal market can be traced back to the late 1970s, most notably symbolized by the mid-1980 landmark joint venture (JV) between Occidental Petroleum Corp and China National Coal Development Corp. Over the past decades, foreign companies have invested some US$1 billion in this still tightly controlled industry. Recent years have indeed witnessed dramatic reform and restructuring in China's coal industry. Becoming the world's largest coal producer, China has seen its coal production grow by 9.7% in the first half of 2005 over the same period in 2004, reaching 940 million tons. Meanwhile, China's domestic coal demand is expected to reach a robust 2.1 billion tons in 2005, and an estimated 2.5 billion tons in 2010. Faced with the most dynamic coal production and consumption market in the world, it is not surprising that foreign players such as Itochu and Anglo American are strengthening their participation in the industry via strategic equity acquisitions and partnerships.

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