Fluctuating policy implementation and problems in grassroots governance

The State Council released its “Circular of Opinions on Accelerating Mergers and Restructuring of Coal Mines”Footnote 12 in 2010, requesting nationwide rectification of the coal mining industry. The guiding principle of rectification as provided in this document is to “make full use of the market mechanism and facilitate it with state policies … combine enforcement in accordance with laws and regulations with institutional and mechanism innovations, reduce the number of coal mines while protecting the lawful rights of workers and investors.” The central objectives are to combine the market mechanism and state intervention to eliminate inefficient coal mines through selection or competition, upgrade the industrial structure, and protect the rights of investors and workers. S Province did not take the implementation of this state policy very seriously and only created its rules of implementation in early 2013. The provincial rules abide by the guiding principle of the State Council by stating that it is to “make full use of the market mechanism and facilitate it with state policies, combine centralized planning with adaption to local conditions and classified management, combine enforcement in accordance with laws and regulations with institutional and mechanism innovations, reduce the number of coal mines while protecting the lawful rights of workers and investors,”Footnote 13 and specify that coal mines that do not have legal mining licenses and do not meet safety-in-production criteria, coal resources-exhausted mines, and mines of which the annual production output is below 30,000 t have to be shut down and rectified. This document also required counties specializing in the coal mining industry to create their work plans before June 2013, make initial efforts to shut down coal mines that did not have legal mining licenses and did not meet safety-in-production criteria, and complete the merger and restructuring of all coal mines by June 2015. It was repeated again and again that the interests of various stakeholders should be protected: “all localities and all departments should attach great importance to the employment of workers, carefully handle the transfers and changes of labor relations of workers … carefully solve the problems of continuing workers’ labor relations and social insurance and unpaid wages and social insurance premiums in order to protect workers’ lawful rights … and cope with problems in debts and liabilities, specify the duties of repayment of debts, and protect the lawful rights of creditors and investors.”

L County welcomed the rules of implementation made by S Province in early 2013, and its bureaus of Labor and Social Security and Economy and Information Technology, which were in charge of this work, believed that the rules would enable “reasonable and lawful” rectification of coal mines. By “lawful” they meant abiding by state laws and regulations; by “reasonable” they meant protecting the rights of local governments, investors, and workers. There were thus few obstacles to implementation. In sum, L County believed that the rules provided the time for rectifying the coal mines and the industrial restructuring, and it planned to take two or three years to shut down coal mines, the smaller ones first and larger ones later, in order to reconcile conflicts and solve the problems.

In early 2013, however, a major industrial accident occurred in a coal mine in S Province, which led to forced suspension of production in all coal mines in S Province for 5 months. In addition, the S Provincial Government decided to accelerate the rectification of coal mines and released the “Emergency Circular of General Office of the S Provincial Government regarding the Acceleration of Rectification and Shutdown of Coal Mines.”Footnote 14 This statement required each county and municipality to select the major local party-state officials to form their own work teams to efficiently carry out the rectification. Before May 2013, the S Provincial Government had set the task of shutting down 120 coal mines in S Province, of which 16 coal mines were in Y Municipality and 4 coal mines in L County. However, the accident in May pushed this number up to 400 coal mines,Footnote 15 dramatically increasing the tasks of Y Municipality and L County. As a result, “management by objectives” (mubiao guanli zerenzhi) was adopted at the provincial, municipal, and county levels to rectify coal mines; in this process, the guiding principle shifted from market mechanism to state administration, and an economic task became a political task.

Some previous research has revealed the mechanism of “management by objectives,” and the main features of which are that governments at the higher levels assign tasks and objectives to lower-level governments and evaluate their performance against quantitative criteria (Wang and Wang 2009). “Management by objectives” reflects the operation of the pressure-based administration (yalixing tizhi), which stimulates officials to employ a variety of methods to fulfill the tasks assigned by superiors (Rong and Yang 1998). In the rectification of coal mines in L County, “management by objectives” can be found in quantitative criteria, assigned dates of completion, and evaluation and corresponding rewards and punishment. The objective was to shut down 400 coal mines in total in 2013 in S Province. Since the number of coal mines in Y Municipality accounts for 15 % of all coal mines in the province, its assigned number of coal mines was 63. Likewise, the number of coal mines in L County accounted for 25 % of all coal mines in Y Municipality; its assigned number of coal mines was thus 16.Footnote 16 The dates of completion were all by the end of the year, when all shut-down coal mines would undergo inspection by high-level governments and archival materials would be submitted to the S Provincial Steering Group. Local party-state chiefs were to be held accountable; they had to either “finish it or get kicked out the office.”Footnote 17

In this strict management by objectives, L County’s original plan of “reasonably and lawfully” shutting down coal mines to smoothly reconcile conflicts and industrial restructuring became unrealistic. The new objectives demanded speedy measures to forcibly fulfill the task of shutting down 16 coal mines. Of the 53 coal mines in L County at the end of 2012, 16 had to be shut down in 2013, accounting for 30 %. L County took three steps to fulfill this task. The first step was regional coordination of quotas. In its analysis, the L County government found that the mining conditions and technology in L County were fairly good and forcibly shutting the mines down was economically unwise. L County thus decided to purchase quotas of rectification from other counties and supplement them with its own mines. Through information collection and coordination, the L County government purchased five coal mines in other counties in Y Municipality, spending 10 million yuan on average for each coal mine. The five mines had limited production output and were on the verge of shutdown and were thus willing to be sold to L County to meet its shutdown quota.Footnote 18 The second step was to shut down four problematic coal mines, among which one had an industrial accident, one underwent an initial shutdown, and the other two were technically difficult to upgrade.Footnote 19 There were only seven shutdown quotas remaining after the first and second steps. Since there was no widely acceptable criterion for selection, the coal mines were ranked in terms of the quantity of coal resources, and the mines ranked the lowest were forced to shut down. This practice was illegal, but given the mandates from the S Provincial Government, L County had to take extraordinary measures. According to the directive from the S Provincial Government in March 2013, these types of mines should not be shut down.

L County did not feel that the forced shutdown of coal mines was legitimate since from the perspective of law enforcement, all mines in the county had their mining licenses. However, the forceful pressure from above demanded that this task be completed. After receiving subsidies from their superiors, the county government spent a large amount of fiscal revenues to facilitate the shutdown of the mines, hoping that the high level of compensation would buy the mine owners’ understanding. Compensation for shutting down mines came from provincial, municipal, and county finances. The provincial government provided four million yuan for shutting down mines with an annual coal production of 90,000 t and above, three million yuan for shutting down mines with an annual coal production below 90,000 t, and one million yuan for coal mines that merged with others.Footnote 20 The municipal government provided supporting funds in the amount of seven million, six million, and two million yuan. Funds from the county government were solely based on production output regardless of shutdown or merger. The policy was seven million yuan for mines with an annual coal production of 90,000 t and above and six million yuan for mines with an annual coal production below 90,000 t. This actually encouraged a merger. When combining the three sources of compensation funds, a mine with an annual coal production of 90,000 t and above would receive eighteen million yuan, a mine with an annual coal production below 90,000 t would receive fifteen million yuan, and a merged mine would receive nine million yuan.

Despite the fact that provincial, municipal, and county governments spent a large amount of fiscal funds, the standards of compensation were barely acceptable to coal mine owners. Opening a coal mine usually required an investment of over twenty million yuan; thus, the compensation did not suffice. L County added more compensation for coal mines and basically reached the amount of investment, and it also asked other mines to provide additional compensation funds based on their production output. L County government explained that sixteen mines were shut down, and thus the surviving mines would benefit from this policy; it was reasonable for them to provide additional compensation funds. The specific criterion was that each ton of coal produced since November 2013 would be levied an additional fee of 20 yuan. Based on the price of coal and the market prospects, it would take at least 3 years to levy the total amount of fees as compensation funds. Among the mines shut down in 2013, the one that received the most compensation funds was a medium-sized mine with an annual production output of 150,000 t; it received 37.6 million yuan in compensation. The three levels of budgetary funds could only provide 18 million yuan in compensation, with the remaining funds to be paid by the surviving mines. The shutdown schedule was that mines shut down by the end of August 2013 would receive the first installment accounting for 50 % of the total compensation funds and mines shut down by the end of October 2013 would receive the first installment accounting for 40 % of the total compensation funds.Footnote 21 Only after the mines had properly handled all equipment and workers’ wages and signed agreements with the government would the shutdown be considered complete and the remaining installment of compensation funds be paid. For the shutdown mines, 20 % of the compensation funds were still withheld in case of additional problems, such as environmental pollution or unpaid wages. Ultimately, L County took forceful measures to fulfill the task.

In this process, the originally light rectification of coal mines was radicalized into a strict political task. The number of mines to be shut down in L County increased from 4 to 16. The criterion for identifying the mines to be shut down also changed from only shutting down problematic mines to forcibly assigning quotas of shutdowns. All levels of government spent their own budgetary funds and deployed harsh measures to fulfill the task. However, the consequences of this campaign were that 3000 workers in the coal mining industry lost their jobs due to the shutdown, and L County’s fiscal revenue was severely impacted. The sudden rise of unemployment intensified the social conflicts that had accumulated and led to a crisis in grassroots governance.