A grim future hangs over this Chinese mining city
Reuters/Jason Lee
A grim, uncertain future hangs over the 1.7 million residents of Datong in the heart of China’s dusty, windswept coal-mining country about 350km west of Beijing.
Amid the imminent threat of massive lay-offs, the city’s coal workers are battling for back-pay and timely salaries just so they can feed their families.
In another area of the city the local government’s boom-and-bust redevelopment plans lie unfinished. A multimillion-dollar “white elephant” sports stadium is slowly being reclaimed by the dust.
Elsewhere, the ruins of the partially built replica ancient walled city are a monument to the failed plans of the city’s former mayor – nicknamed “Demolition Geng” – who dreamed of remaking an “ancient walled city” in the urban center, but who is long gone.
The half-demolished buildings and stalled construction are reminders of the false dawn of a prosperous future.
The uncertainty in Datong is similar to that afflicting many other smaller cities grappling with the mainland’s economic slowdown, stagnant population growth and excess production capacity: all had big dreams but few came true.
Datong is home to the Datong Coal Mine Group, a state firm with a 175,000-strong workforce that is grappling with shrinking coal use, falling coal prices and diminishing reserves.
The company is trying to rally its workers, even though it knows its prospects are bleak. The new banner over the gates of its mines urges workers to “Survive, Push Through, and Maintain Stability”, replacing a more hopeful one calling on the miners to “Realize the China Dream, Realize the Datong Coal Dream”.
The city is on the front line of the country’s battle to phase out excess industrial capacity, which – along with heavy business taxes, sky-high property inventories and financial risks – is threatening efforts to keep economic growth ticking over this year at a minimum of 6.5 per cent. So far, the mission to trim capacity has been carried out by stealth: there has been no official announcement of lay-offs or a deadline for retrenchment. Instead, salaries have been cut or simply unpaid for months as people look over their shoulders waiting for the axe to fall.
Zhang Wangquan, 36, an explosives safety technician, started work at the group a decade ago, taking over a place vacated by his father’s retirement – a common practice in Datong where many generations of the same family work in the industry.
Sitting in a square in front of the mining company’s head office on a workday afternoon, Zhang is not optimistic about what lies ahead. “A 500 yuan [HK$600] cut in salary came in last October, and we have to take many more days off,” he said. “Worse days are yet to come.”
Times are also hard for miner Wang Yong. Wang, who is in his 30s – his face and clothing blackened with dust – is already owed two months’ wages.
“It’s getting harder to make much money in mining,” he said. “No matter how hard you work, your salary just gets cut.”
Reuters/Jason Lee
That’s in part because the government plans to cut coal’s contribution to the country’s energy mix to half by 2030 to improve the nation’s air quality. Last year coal accounted for about 64.5 per cent of the total.
At the same time, the mainland’s demand for electricity generated by coal-fired power plants is falling quickly as overall economic growth slows and heavy industry retreats. Coal and steel are no longer seen as vital for the nation’s continued economic growth. There is little chance of coal prices rising: the present price of coal is less than half of what it was five years ago.
Those changes are also likely to affect coal mining and heavy industry in places like Heilongjiang (黑龍江), Hebei and Inner Mongolia – not only in terms of financial costs but also socially and politically.
Datong grew by 9 per cent last year, according to the local statistics bureau. But in a city where the coal industry accounts for two-thirds of overall industrial output and affects the well-being of more than half a million people, the process of reducing its reliance on the loss-making coal industry will be particularly difficult.
Residents said small demonstrations had already broken out over unpaid wages. Bigger protests occurred last month in Shuangyashan on the Russian border, when thousands of coal mine workers took to the streets over back-pay.
“This is a major problem,” said Christopher Balding, associate professor of economics at Peking University HSBC Business School, in Shenzhen.
“People always focus on places like Beijing, Shenzhen, and Shanghai, but these cities represent a tiny portion of the country … There are a lot more cities like Datong and Shuangyashan than like Beijing and Shanghai.”
These smaller cities have little insulation against tough economic times.
Datong is particularly poor, with per capita income below the national average. The city’s traditional dish of shredded noodles, costs 6 yuan (HK$7) per bowl, and in the restaurant at the entrance to Tongjialiang mine, a lunch for three, including 25 dumplings and a few dishes, costs only 30 yuan – less than a Starbucks latte.
During last month’s National People’s Congress, Datong Coal chairman Zhang Youxi said Beijing should consider the social impact of the expected massive lay-offs, even if such redundancies were necessary.
“One coal mine has about 5,000 to 7,000 employers, and they have around 20,000 relatives … It might be easy to close down one coal mine, but not as easy to close down a city,” he said.
The city has already resettled about 400,000 coal mine workers and their families to a densely populated new town called Hengan New District, a place local residents called “slum district”.
Datong’s problems have been compounded by its stalled massive urban development plans launched by Geng Yanbo, the city’s mayor from 2008 until early 2013.
Geng, the subject of director Zhou Hao’s Golden Horse-winning documentary The Chinese Mayor, started a programme of breathtaking ambition.
Using the easy credit of China’s stimulus programme, Geng planned to build a replica “ancient city” covering 3.3 sq km and requiring the relocation of about half a million people.
Whole housing blocks were razed to make way for Geng’s dream of fake ancient courtyards and boulevards. His methods earned him the nickname Demolition Geng – literally “Geng ChaiChai” or “Geng Smash-Smash”.
Geng moved on three years ago after being promoted to the post of mayor in Taiyuan, Shanxi’s provincial capital.
But, to this day, a gap remains in the western part of the unfinished city wall, while inside the newly built “old city”, demolition is still under way. Newly paved main streets within the walled “city” are now occupied by leather fashion retailers and jewelry shops, while buildings in the small alleyway areas remain largely empty.
Reuters/Jason LeeGeng is remembered by many residents as a capable and devoted official, who tried hard to give Datong a future that was not tied with its coal industry.
“Coal reserves can be depleted, but what Mayor Geng has built up here will remain forever,” taxi driver Wang Fuxiang said. “It’s like having a house mortgage; you want to live in a better house, and there’s no problem about borrowing money to finance it.”
Another retired worker said: “Geng completely changed the landscape of Datong, and it is an extraordinary thing.”
Yet there are also complaints about what the bulldozing plans have done.
On one remaining courtyard, surrounded by rubble, a hand-written sign, hanging on a gate, warns, “Don’t touch a single tile or brick”.
Renmin University economics professor Tao Ran said this wholesale approach to urban development was unsustainable.
“It will take quite a long time [for China] to address the hangover [caused by irresponsible urban development],” Tao said.
The hangover from overdevelopment has been a common problem in the country’s smaller cities, where local government ambitions to attract new residents have often been unrealistic.
A 2014 survey carried out by a think tank formed by China’s planning agency concluded that the combined living area of “new districts” planned in mainland cities could house 3.4 billion people.The World Bank puts China’s population at about 1.364 billion.
Datong’s Yudong New District, built on a former rural area in 2009, is one such new district.
Hundreds of high-rise buildings have sprung up there over the past six years, but many of its property projects have simply been abandoned.
The main structure of the city’s 1.2 billion yuan sports stadium was erected, but has since been left to the elements.
Other deserted structures include a library, an opera house and a fine-art museum. Only a municipal museum was completed and open for tours.
A commercial property project, named China Tang City, for example, stands there with no sign of work. According to tattered, fading posters, the project was originally designed to include a shopping mall, a hotel and a residential complex.
The dream has long since gone, leaving behind huge debts and more uncertainty, which will only worsen as the city’s heartbeat – its coal industry – slowly dies.
As with any other local government, it is hard to pin down Datong’s true municipal debt leverage ratio. Mainland media reports suggest it could be as high as 20 billion yuan. In 2015, Datong’s fiscal revenues were 9.2 billion yuan – a 12 per cent year-on-year fall. In another sign of its woes, property investment in Datong plunged by 41.4 per cent last year when the real estate bubble burst as the coal boom evaporated.
“This scenario is playing itself out in many cities in China, particularly northeast and central China [as the commodity boom has ended],” said Scott Kennedy, director of the Washington-based Centre for Strategic and International Studies.
“The loss of profits and jobs, and the painful restructuring is also necessary. Welcome to the age of growth with volatility.”
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