Controlling Factors in the Future Development of the Chinese Coal Industry 9780231880312

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Controlling

Factors in

THE FUTURE DEVELOPMENT O F THE CHINESE C O A L INDUSTRY

Kung-ping Wang B.S. Cheni., B S . Min., B.S. Met. & M.S. Min.

KING'S

CROWN

PRESS,

MORNINGSIOE HEIGHTS

1947

· NEW Y O R K

Copyright 1947 by KUNG-PING WANG

Printed in the United States of America

KJIG ' S CROM PR S SS is a divi: ion of Columbia University Press organized for the purpose of making certain scholarly material available at minimum cost. Toward that end, the publishers have adopted every reasonable economy except such as would interfere with a legible format, the work is presented substantially as submitted by the author, without the usual editorial attention of Columbia University Press.

Typed by Vivian Jones Printed

by Edwards Brothers

Lithoprinted in U-S.A. EDWARDS BROTHERS, INC. ANN ARBOR. MICHIGAN

1947

ACKNOWLEDGMENTS The author wishes to express his gratitude to Professor T. T. Read, Executive Officer, Columbia School of Mines, Columbia University, under whose supervision this research was undertaken, for his generous support of this work in supplying the necessary information, and for the overall guidance without which this work would never have been possible. The author is indebted to Professor C. H. Behre, Jr., Department of Geology, Columbia University, for his inspiration and his patient reading and correction of this work. He also wishes to thank the following gentlemen of Columbia University for their advice and guidance: J. E. Orchard, Professor of Economic Geography; R. S. Alexander, Associate Professor of Marketing; P . B. Bucky, Associate Professor of Mining; L. C. Goodrich, Professor of Chinese; Leo Wolman, Professor of Economics; C. S. Gardner, Visiting Assistant Professor of Chinese. Grateful acknowledgement is made to his wife, Mary, for all the help she has given.

CONTENTS

1. A General Survey of the Problem II. Influence of Coal on Modern Economic Development

1 25

III. Coal Reserves of China

36

IV. China's Coal Production

50

V. Position of Coal Among China's Power Resources VI. Technological Problems of Coal Mining VII. The Problem of Coal Labor VIII. The Problem of Coal Transportation EX. The Problem of Coal Marketing X. Sources of Domestic Coal Consumption XI. China's Foreign Coal Trade XII. Policies of Post-War Industrial Development Bibliography

63 73 95 122 141 162 187 210 222

CEAPT ER I

A G E N E R A L S U R V E Y OF THE

PROBLEM

The most important single factor for the successful development of the Chinese coal industry is peace and order. Without political stability, no industry can look into the future with confidence. Coal companies, like other business organizations, cannot shut down sporadically and still be profitable enterprises. In fact, the d i s r u p tion of any phase of coal distribution will equally restrict development. Hitherto, adverse conditions in China caused by internal d i s o r d e r and Japanese aggression have greatly hindered the normal growth of the infant coal industry. There have been cases where mines w e r e temporarily closed because they became battlefields. M o r e commonly, railway tracks were torn up or rolling stock destroyed, thus preventing the flow of coal to markets. Some coal companies were even forced out of business f r o m excess taxes imposed by the war lords. The effect of the Sino-Japanese hostilities was more disastrous. Consequently, relatively few modern coal mines in China proper have ever been prosperous. Kailan of Hopei province is an exception because, aside f r o m being more accessible to treaty ports, it enjoyed greater security as a joint Sino-British concern. Chunghsing and Huainan coal mines flourished between 1931 and 1937 because Central Government influence had extended to those a r e a s . On the other hand, the total coal output of Manchurian coal mines tripled during the fourteen years of peaceful development under the Japanese. Although the political picture in China is still shrouded in doubt, public opinion demands unity. With the adoption of a new constitution, it can be expected that peace and order will at last come to

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China. All other conditions being equal, this factor alone will greatly facilitate future coal production. Furthermore, with the abolition of extraterritorial rights. China can undertake a rational plan of industrialization, which in turn will promote coal development. SPECIAL SIGNIFICANCE

OF COAL TO C H I N A ' S

ECONOMY

Importance of Coal to Modern Economic Development. Coal is indispensable to the present-day industrial civilization. As a raw material in the production of iron and steel, it has no substitute. As a source of energy in turning the wheels of industry and c o m m e r c e , it sees no rival except oil in recent y e a r s . As a fuel, it m i n i s t e r s to health and comfort to many homes even in primitive lands. It s p e a r headed the industrial revolution of Great Britain, Germany, and the United States during the latter part of the 19th century. More recently, in cooperation with iron and steel, it has also wrought m a r v e l s for the industrial economy of Russia. Can it do the same for China? The annual world output of a billion and a half tons of coal is about seven times crude oil and iron ore production, and ten times that of wheat. Yet in t e r m s of monetary value, it is worth less than the latter. Indeed the relation between the low unit cost of coal and the amount of comfort it can provide is one of the chief reasons why coal has been so extensively utilized in highly industrialized countries. Two pounds of coal can do the work of a man-day at a cost of one American cent. Thus coal, when properly applied, is by f a r cheaper than even "cheap" manpower in China. One reason for the high standard of living achieved in the United States is because an American's capacity for work is multiplied twenty-fold through coal utilization alone. Conversely, in a backward nation like China, coal utilization adds only one-third of a manpower to a Chinese. It is t h e r e f o r e clear that coal development is vital to China's modernization. Among the advanced uses to which coal may be put, synthetic oil is most interesting. The technique has already been perfected, but production costs are not yet competitive with liquid fuel made from petroleum. However, for strategic reasons, the uneconomic development practiced in Germany and Japan may be justified. Unless more petroleum is found in China during the next ten years, it. may become imperative to produce liquid fuel f r o m coal for powering certain types of machinery. Adequacy of China's Coal Reserves. Fortunately, China p o s s e s s e s sufficient coal for industrialization. Her 250 billion metric tons constitute nearly 4 percent of the world's total, being surpassed only by

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the United States, Russia, and Canada, but comparable to other industrialized nations such as Germany and Great Britain. Even in t e r m s of per capita reserves, she ranks high among the nations. China can probably sustain a future 100-million ton annual output for 2,500 years. Moreover, it should not be overlooked that far greater reserves may exist. Fuller and Clapp's careful prospecting work covering the central and western sections of the great Shansi-Shensi coal field alone pointed to 450 billion tons of "recoverable" coal. Drake's separate estimate on eastern Shansi province adds another 350 billion tons. Together with more geological work in Sinkiang and Manchuria, as well as other areas, the total reserves may well be three times the present figure credited by the Geological Survey of China. The coal resources of China can be grouped into four regions: North China, chiefly Shansi and Shensi provinces, possesses over four-fifths of the total; Northwestern China, about 3%; Southwestern China, 5%; and Northeastern China, about 8%. Other power resources, chiefly water-power in China, naturally modify the future pattern of economic development. Nevertheless, it is strikingly apparent that, especially in North China, coal must be the cornerstone of industrialization. As to the quality of coals, three-fourths are of bituminous rank, one-fifth anthracite, and the remainder, lignite and unclassified coals. Coking coal is adequate for meeting the demands of a 5-10 million tons iron and steel industry; unfortunately, high grade deposits are limited. Many Chinese coals are friable, high in ash and sulfur; but this situation can in part be remedies by adequate coal preparation; and, on the other hand, numerous others compare favorably with the best in the world. Generally speaking, coal is not only more plentiful in the north, but of higher quality than southern coals. Possibility of Expanding China's Coal Output. Unlike most other countries, China is not at present faced with the problem of coal conservation because production is so limited. In 1936, including the four northeastern provinces, the output was only 35 million metric tons. Even this meagre supply contributed substantially towards developing China's transportation and electrical facilities. But in view of the fact that the average Chinese receives only about 150 pounds of coal per year, the relation between greater production and higher living standards is apparent. After a period of readjustment, China will be in a position to produce 40 million tons annually from the 40-odd modernized and numerous native mines now in existence. This could be achieved mainly

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through the operation of expanded facilities in Manchuria and, to a lesser extent, those in Southwest "Free China". As to the coal mines in the coastal provinces, mainly in North China, restoration of prewar distribution channels will bring the production back to normal. Certain reforms within the industry, such as consolidation of small mines in a given region and organizing marketing of coal companies, would also enhance production. According to Dr. Wong Wen-hao's ten-year program, the ultimate goal of coal production is 100 million tons annually. This would mean that an additional capacity of 55 to 50 million tons must be provided at a cost of roughly 200 to 300 million US dollars capital investment. Without a national plan of industrialization, such a goal can hardly be attained. Development of industries closer to raw materials rather than to markets would result in lower transportation costs to manufacturers and greater coal consumption. The development of new coal mines near existing industrial centers, especially in central China, would similarly mean a larger and cheaper coal supply. Coordinating railway and coal development, notably in southwest China, would be beneficial to both industries. Indeed, if the Government takes the attitude of facilitating efficient private enterprises while undertaking management of others which lack sufficient capital, then coal production, along with other industrial goods, should rapidly expand to meet the future industrial demands of China's economy. Relative Importance of Coal and Oil in China. Coal is especially important to China s economy because the resources of its closest rival, petroleum, are comparatively small. In terms of B.T.U., the potential power of coal in China is at least 250 times as great as that of petroleum. However, this is not synonymous with saying that badly needed oil reserves cannot be uncovered, once exploration begins on a more extensive scale. On the contrary, recent discoveries in the Yumen district of Kansu province, and the Kiangyu district of Szechuan province seem to justify an optimistic view. Nevertheless, the general widely scattered occurrence of coal logically places the burden of powering future industries mainly on coal. Furthermore, coal production in China can compete favorably with imports; while oil, aside from a few remote interior wells, cannot. Recognizing the need for conserving oil as a long-range policy, and the immediate necessity of reducing oil imports in order to save foreign exchange for industrial tods, it is imperative to utilize coal in place of oil whenever practicable. In China, oil-fired locomotives should not be introduced in the railway industry, not only because of the scarcity of oil, but because it is becoming possible to design

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turbo-electric pulverized-coal-fired locomotives, which are expected to reduce fuel costs below oil. The same may be said of the future Chinese shipping industry. The iron and steel industry should not only utilize all the by-product gas from coking, but use coal and coal gas wherever possible instead of oil. Gas companies in China should rely on coal and avoid the use of oil to enrich the gas from producers. Some types of coal could be converted to gas and liquid fuel for domestic purposes. Relative Importance of Coal and Water-Power in China. The potentialities of water-power are great in China. Possibly over 30 million kilowatts could be developed from China's famous rivers, notably the Yangtze, but also the Huangho, Sikiang, Sungari, Yalu and their tributaries. The topography of China is such that these rivers drop steeply from the interior highlands to the coastal plains. However, the development of hydro-power, in contrast with coal, is limited by various factors, such as the fixed location, the seasonal variability, and the probable excessive initial costs. Hence, unless favorable economic conditions exist, as for instance, the occurrence of natural dams, r e s e r v o i r s (or cheaply available reservoir land), narrow and deep channels, plus accessible power markets; hydroelectric plants usually cannot compete with modern thermo-electric plants. Furthermore, efficient coal utilization in recent years has transformed fuel costs from a major to a minor cost item in thermal plants*The argument that higher fixed investment costs of waterpower are offset by excessive fuel costs, is therefore unfounded. For the overall aspects of China's economy, the development of hydraulic projects is also important, especially where favorable conditions exist. A coordinated plan of coal and water-power development is therefore advocated. In areas, such as north China, where coal is abundant and water-power limited, there would be no question as to the sound plan of development. Similarly, in southeast China, for instance Chekiang, where coal is scarce and locaL water supply available, the choice is also obvious. In Manchuria, the industrial structure would be in a position to absorb both sources of energy supply. However, in the southwest, where water-power resources are great and medium quality coal also available, careful planning is necessary. The eventual development of the Yangze, Tatu-ho and Min River hydraulic projects will contribute much to China's industrial and agricultural progress. But due to the limitation of time and funds, it will be wise first to erect coal-thermal plants at the future hydro*01der s t e a a p l a n t · a e l d o · t r a n a f o r a e d o v e r 10 p e r c e n t of the i n t o u s e f u l B e c n a n i c a l p o w e r , v h i l e the b e a t a o d e r n p l a n t a ahov recovery.

a v a i l a b l e heat over 25 p e r c e n t

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electric sites, which could later be moved to new frontiers or kept as standby plants when the dams are finally ready. The important fact that coal power can generally be more cheaply and rapidly exploited than water-power must be recognized by China's "planners." Indispensability of Coal to the Development of the Iron and Steel Industry. China must produce larger quantities of iron and steel, for both strategic and industrial reasons. She has sufficient r e s e r v e s of iron ore and coking coal for a moderate industrial program and therefore should not have to depend forever upon iron and steel imports. Resource factors, concerning the location of the two main raw materials with respect to each other and to the markets, are not unfavorable. However, due to the inevitable high costs required to exploit generally lower-grade iron ores and the difficulties associated with the establishment of a new enterprise, the future iron and steel industry must at least temporarily be subsidized and protected by the government in order to cope with foreign competition. The need for building a scrap iron economy and the absence of fabricating industries further complicate the picture. Nevertheless, there are several centers favoring large-scale operations. The best known is Anshan, in southern Liaoning, which already produces semi-processed steel products. Though the iron ore is of low-grade, cheap coking coal from Penhsihu is easily available. The Miaoerhkou iron deposits are even nearer to Penhsihu. The large Tungpientao iron ore deposit in eastern Liaoning, as yet little developed, has great potentialities because of its high grade and the proximity to coking coal at Talitzukou. The Manchurian markets are expected to expand, and excess iron and steel products could be shipped to south-central China. In North China, the smaller Hsuan-Lung deposits of Chahar could be smelted at Tangshan, the site of coking coal, or near the potential markets of Tientsin and Peiping. The Tayeh-Ocheng deposits near Hankow, utilizing Pinghsiang (Kiangsi) or Liuhokou (Honan) coking coal, should be revived at Hankow for the central China market. L e s s important, is a site near Nanking based upon central Anhui iron deposits and Chunghsing coke in Shantung. Iron works in Hainan Island also have possibilities. The future development of the extensive high-grade Luku deposits of Sikang, which could furnish the interior markets with iron and steel, must depend upon better transportation facilities and the discovery of nearby coking coal. Although few areas in China favor the development of large iron and steel plants, many are suitable for smaller ones. The practice of making pig and wrought iron by native methods whenever iron ore and coal are available is common in many parts of Shansi, Szechuan, Hunan, and Kiangsi provinces. If cheap transportation makes the out-

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put available to central plants, the aggregate tonnage could be considerable in the future. China certainly needs all her iron and steel. NEED

FOR

MODERNIZED

APPROACH

TO COAL

MINING

IN

CHINA

Extent of Mechanization Applicable. Although natural physical conditions, such as pitching and faulted s e a m s and occasional disastrous water r e s e r v o i r s , a r e not generally favorable to coal mining· in China, it is important to exploit coal in the most efficient way possible. The damage which s m a l l - s c a l e unsystematic mining has already done to coal in place cannot be remedied, but the practice should be carefully guarded against in developing virgin fields. Mechanization in Chinese coal mines cannot be expected to approach American standards because mining limitations, s i m i l a r to those existing in the US anthracite region, prevent the use of certain types of machinery. F u r t h e r m o r e , cheap unit labor costs in China necessitate striking a balance between machine and hand mining. However, higher productivity and wages can come only through partial mechanization. Of fundamental importance is f i r s t , the mechanization of basic s e r v i c e s , such as power-houses, hoisting apparatus, pumping facilities and ventilation equipment. No modern underground mine can operate otherwise. Secondly, electric locomotive haulage can be successfully used for large outputs. Calculations on relative costs of human, mule, and motor main-line haulage, point to the desirability of the latter in the not too distant future. Thirdly, the undercutter has great possibilities in exploiting relatively thick and level coal s e a m s . Electrical d r i l l s can be economically applied and should be widely introduced in all Chinese mines where it is planned to t r a n s mit electric power underground. Fourthly, among the mechanical loaders, the most promising type is the shaker conveyor which is applicable to all conditions except very highly pitching s e a m s . Under favorable conditions it can compete with Chinese hand-loading even now. In organizing new Chinese mines, it is important to plan to use electric power r a t h e r than compressed a i r and steam. The possibilities of s t r i p mining should also be carefully studied. That it is applicable in China when conditions permit is shown by the very low cost of Fushun coal in Manchuria. True, the initial investment in shovels and draglines is high, but in view of their long life and easy transference and salvage, the unit coal production costs a r e generally lower than in underground mining. Diesel bulldozers, " r o o t e r s " and wagons a r e especially cheap in moving clay or other overburden. At least two deposits, namely, Hekang and Chalainor in Heilungkiang, and possibly Fuhsin, in Jehol, could be in part thus mined. Surface coal is also found in many parts of Shansi.

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Need for Efficient Management and Skilled Workers. With the advent of partial mechanization of coal mining in China, management can no longer remain a haphazard affair conducted by men with little administrative ability and no technical knowledge. Some of the inefficient employers of the old school must be gradually replaced by modern-minded men. The future administrators should thoroughlj understand the problems of adapting Chinese labor to western equipment, modern corporation and staff organization, as well as the Chinese Mining Laws and native business customs. It is imperative to have competent engineers to plan the mining operations, as well as experienced supervisors to see that the work is actually done. The importance of careful selection of qualified men to assume r e sponsible positions is accentuated by the prospect of greater government participation in the coal industry. Coal administrators must not be hampered by political considerations leading to corruption and waste. The lack of skilled workers must be remedied by some farsighted training program on the part of coal operators. The cost incurred for closer supervision must be distributed over a considerable output to insure success of the program. It should be remembered that coal mechanization generally means the training of limited numbers of electricians, mechanics and machine shop workers. The bulk of the labor who mine and transport coal need not have very much technical experience, but they must learn teamwork. The problem of operating machines is relatively simple. As for maintenance, correct habits must be stressed in the training courses. The coal miners will undoubtedly grasp very quickly the importance of tighten ing bolts and oiling the equipment because work stoppage in contract mining simply means less pay. Availability of a Steady Supply of Labor. Even assuming partial mechanization, at least 600,000 miners will be needed to sustain China's proposed 100-million ton per annum coal production. The population figures of China would indicate that this quota could be easily met. Unfortunately, only a small fraction of the large labor reservoir is actually available to the coal industry. Unless certain traditions are modified and reforms introduced, an adequate supply of steady high class labor, so vital to modern coal production, cannot be created. Most of the coal miners in China, as well as industrial labor in general, originally came from the farms. They seek employment in coal mines not because they like the dangerous work but because they cannot earn a living otherwise. However, after some savings

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have been accumulated the temptation to return home is great. Indeed, the strong agricultural and family traditions contribute substantially toward the instability, and perhaps detract also from the availability, of labor in the coal industry. To cope with this situation, it is not only essential to improve working conditions and give higher wages, but also to provide good living quarters for the men and their families with the aim of ultimately creating a stable labor supply. Added expenses could be covered by greater productivity and larger outputs in future expanding coal markets. Of utmost importance is the abolition of the corrupt contract system of hiring labor in the Chinese coal industry. The contractor, who is the traditional middleman, often assumes a strangle-hold, both socially and financially, over the miner, hence can, in a way, dictate his employment. Though the local labor supply around coal districts is generally adequate in China proper, the management may find it unavailable if the contractor refuses to cooperate. This situation is reflected at Chunghsing Company in Shantung province where nine-tenths of the contract miners come from nearby Yihsien. The contract system also affects the stability of labor, because the workman, knowing that the contractor is exploiting him, will naturally not work any longer than he has to. Since both management and organized labor are against the oldfashioned contract system, it could be done away with, or at least modified, in the near future. A drastic plan of discharging the contractors, and replacing them with company foremen, would be successful where organized labor is strong. Otherwise, it is important to compromise with the contractor, by making him foreman and giving him a small cut of his workers' wages. For new mines, it is necessary to send experienced company men to recruit labor. In all cases, direct payment of reasonably high wages, will not only help centralize management, but aid in stabilizing the labor force. Increase in Productivity of Labor. The productivity of even the most modern mines seldom exceeds half a ton per man-day in China. This corresponds to less than 40% of average European mines, and 10% of American mines. The general industrial backwardness coupled with low-priced labor in China keep the efficiency down. However, these conditions will radically change in the future., hence, if coal operators do not anticipate larger production, nor plan for greater productivity, they will find it impossible to cope with higher labor costs. Some general tendencies pointing to higher efficiency in all industries exist. For instance, in the normal economic growth of

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post-war China, greater demands for industrial goods will stimulate production, even without any expansion of facilities. The average productivity will also increase through the establishment of more up-to-date mines and plants. Most important, the probable rapid development of transportation will assure a steady flow of goods to the markets, which in turn will produce greater productivity in all industries. With regard to the Chinese coal industry itself, the productivity of labor could be increased by certain reforms suggested. First of all, it is necessary to transform the corrupt Chinese contract system into the modern form, whereby an incentive to work harder for a rightful higher pay can be created. Secondly, working and living conditions should be improved in order to conserve the health needed for greater labor efficiency. Thirdly, a more scientific development of the mines is required not only to recover more coal, but to do so with the least effort. Fourthly, a steady labor supply must be made available so that the workers can be trained. Finally, it is absolutely essential to infuse new life into an antiquated hand-mining coal industry by as much machinery as applicable. China should, through these improvements and reforms, be able to approach Japanese or European standards of coal productivity in the next decade. If the efficiency increase can exceed the rise in wages, then coal production costs will decline. This in turn can build up China's competitive advantage in international coal trade, as well as raising the living standards of the people. H E O R G A N I Z A T ION

OF

TRANSPORT

FACILITATE

COAL

AND

MARKETING

TO

PRODUCTION

Dependency of Production on Efficient Transport. Transportation plays a vital part in determining the pattern of coal development. Hitherto, large-scale production has not come from the areas of highest reserves in China, but rather from those fortunately located near main railways and ports. Because of the bulky nature and low unit value of coal, transportation costs constitute an important item in its selling price, especially in a country of such great distances as China. Even with modern transport, Kailan bituminous coal, for instance, is mined at CNC$3.50 and sold at Shanghai for at least four times the production cost. Where only primitive means exist, as in China's interior, prohibitive costs limit coal production through confining its distribution to local markets. It is therefore clear that in order to stimulate production, there must not only be adequate markets, but efficient transportation facilities.

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Wheelbarrows and carts can still hold their own against truck distribution of coal in cities which are not highly modernized. However, che disparity of costs is not so great but that cheaper diesel fuel, for example, could not tip the scale. The same can be said f o r pack animals, like camels, for short hauls. This latter situation can be partly remedied by good roads, on which motor transports depends. Rail transport has a different sphere of participation in that rehandling costs for short distances are excessive. But f o r long hauls and large volume of coal, it is not only indispensable, but probably ten times cheaper than wheelbarrows, carts, pack animals, or trucks in present-day China. Railway rates of 1 to 1-1/2 Chinese cents p e r metric-ton-kilometer prior to 1937 should be considered low even according to American standards. Next in importance is water transport f r o m North to South China via the ocean and up the lower Yangtze. The volume of coal so far handled is about one-fourth of that by the railways. F r o m a geographical standpoint, the operations do not compete with rail transport, and this fact might explain why the rates have been so v a r i able. Depending upon traffic conditions, coal transportation costs by water may be lower than by ráil, or several times higher. Inland water transportation of coal by native junks, though generally far more expensive than by rail is especially important to Southwest China, where railways are lacking. The problem for the future is not only to create more transportation facilities, but also to improve on those which are already available. For instance the Chungfu Company, Honan province, assembled 700 junks in 1935 to transport coal via the Wei River and Grand Canal at rates even lower than rail charges. Larger and modified shallow-draft junks, supplied with auxiliary steam engines, would greatly facilitate transportation of coal and other commodities in China's numerous waterways. The use of little steam tugs to tow barges and self-propelled barges would also be important. Coastal vessels, adequately protected and carefully calculated as to the "return cargo," can transport coal cheaper than rail, as witnessed by the success of the Kailan Company in distributing coal to southern ports. In the future, medium-sized steam vessels (5000 to 7500 tons), built on the principle of LST landing boats, could sail from the open sea far up the Yangze, and unload coal even at points where adequate port facilities do not exist. With regard to railways, more will be said later, but it is important to point out that freight rates could be reduced through o r ganized effort. The practice of starting from the costlier end of

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the conventional "tapering rates" every time coal passes to a new railway line is a great disadvantage to some coal mines. The railway industry should recognize that cheaper rates mean more traffic and lower operating costs. Reduction of transportation costs through more efficient fuel utilization and management is also essential. Correlation between Railway and Coal Development. The coal and railway industries are in many ways interdependent. Coal mines are important to railways a^ a source of fuel. Most of the railways are located in the north, where the large collieries exist, hence it is only natural to discover that coal was available to them there at CNC$4-6 per metric ton in contrast to South China, where its cost was from CNC$20 for the Canton-Kowloon Railway, and CNC$16 f o r the Shanghai-Nanking Railway in 1933. Coal is also essential to railways "as a source of freight tonnage and revenue. It probably provides half the freight tonnage and one-quarter of the freight revenue in China. On the other hand, railways are, in a way, indispensable to coal production in that three-fourths of China's output normally has been transported by rail. Furthermore, several mines in north Manchuria, for example, rely totally on railway fuel demands for their existence. The interrelated problems of the two industries are numerous, hence necessitate coordinated planning. There is a shortage of rolling stock for coal transport, which has been accentuated by wartime destruction. If railways and coal mines cooperate to provide the necessary cars, the investment could be amortized from the revenue yielded by the increased coal traffic, and the cost reductions accruing f r o m mass production. Car shortage could also be remedied by encouraging coal transportation through freight rate reduction during "slack" traffic months. In building new railroads to tap undeveloped coal and other mineral deposits, it may be feasible to appropriate a part of the mining profits as taxes to support railway loans, and hence to pay for the service rendered by railroads. However, this proposal is debatable because mineral freight, though important, constitutes only one phase of the total traffic, which must also include agricultural and industrial freight, plus passenger traffic. Probably the cost of railroad investment could be financed by the newly created revenue, and yet without over-taxing the coal industry. Nevertheless, it is quite clear that any program for railroad expansion should not only aim at knitting together the political, military, and population centers, but should also assist in developing the essential mineral re-

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sources, like eoa} in the southwest and northwest, so that they will be accessible to fiiture industrial markets. The success of some coordinated plan is foreshadowed by profitable railway operations during the peaceful pre-war years (1931-1937), especially in North China. Importance of Efficient Marketing. In a modern industrial economy, special types of coal and coal products are demanded for specific purposes, hence the problem of efficient merchandizing becomes correspondingly intricate. Coal marketing covers a broad scope of activities, involving physical, chemical, and metallurgical treatment, as well as coal sales and distribution. Both financially and technically, it is no less essential than coal production and transportation. Furthermore, efficient marketing promotes sales, hence stimulates coal production. First of all, the knowledge of the quality of coal enhances marketing. For general heating and steam-raising purposes, almost any grade can be utilized, but preference lies with those coals possessing high-heating, rapid-firing, low-clinkering as well as longburning qualities. However, specifications for metallurgical and gas coals for instance are much more rigid. A r e China's coking coals limited to Kailan, Chunghsing, Liuhokou, Chinghsing, Pinghsiang, and Penhsihu mines ? Do the newly discovered Tungpientao, Nanchuan and Hsiangtan deposits satisfy the conditions of low sulfur, phosphorous and ash content, plus strength at high temperatures required for coking? An attempt to answer these questions is made in subsequent chapters. Secondly, it is wise to bear in mind that coal can be processed to suit market conditions. Sizing, though at present unimportant in China, will be a condition for efficient coal utilization in future industrial and domestic stokers. Cleaning of high-ash coals will be indispensable for coke manufacture. Under certain circumstances, the mixing of coals f r o m adjacent fields or seams may also be desirable. For example, Fushun (non-coking) and Penhsihu (coking) coals have been mixed to form a satisfactory coking coal. Future industries will be willing to pay f o r higher-priced, better-quality coals if they cannot do without them. As China becomes developed, separate manufacturers or industrial consumers may find it feasible to treat coal still further. The process of high-temperature carbonization is widely applied to coking coals because it permits not only the manufacture of coke, but also the recovery of by-products, which would otherwise be lost by primitive methods. Its success, as in Manchuria where there are three by-product coke producing districts, depends upon a local,

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fairly specialized system capable of absorbing all the products. On the other hand, low-temperature carbonization, aimed chiefly at producing utility gas from lower grade coals if necessary, can be profitable in all large industrial cities and population centers. Can Nanking, Tientisin, and Peiping have a gas supply like Shanghai and Mukden? Coal hydrogénation or liquefaction, though already introduced in Manchuria by the Japanese, does not seem economically feasible now; but has great potentialities. However, the future of pulverized coal is bright in China, since coal could thus be efficiently utilized at cheaper rates. Nor should it be overlooked that the lower-rank coals of the Southwest, notably lignite in Yunnan, can perhaps be profitably briquetted in the future. Planned Marketing Control. The discussion of the technical angle of marketing makes it evident that the sales and distribution end is equally complicated. In China proper, the present situation can be described as inefficient or unorganized. Most of the largest collieries generally sell their coal directly to consumer or retailer through sales departments in various cities. The medium-sized mines sell more to wholesalers, or sales agencies, on a commission basis. In either case, the collieries usually assume the r e sponsibility of transportation. If there were a limited number oí central marketing agencies in various cities to handle coal of all collieries, the overall personnel needed for directing sales could be greatly reduced. By allotting sales quotas, there need be little cut-throat competition for the markets. Furthermore, centralized marketing could minimize rehandling and facilitate coal distribution. If coal could be consigned f.o.b. mines to the marketing agen cies, then the collieries could be totally relieved of sales and distribution responsibility so as to concentrate on production. Organized efforts are even more important for the numerous native mines, whose products need not be confined to local markets when transport does exist. The marketing of coal in Manchuria was formerly like that in China proper, except for the Japanese-controlled mines. However, during the fourteen years of Japanese occupation, all mining and metallurgical products, including coa] and coal products^ were distributed by a quasi-governmental concern called the Japan-Manchoukuo Trading Corporation. This company acted as the wholesale merchant to replace all the sales and trade departments of the producing companies. Important saving which resulted points to the desirability of such a plan, or a similar one. Perhaps under conditions of expanding coal consumption, it will

THE

CHINESE

COAL

IB

INDUSTRY

be sufficient to have centralized marketing agencies. However, as a long-range policy, it seems wise to have a national control scheme, as In most of the important coal-producing countries in Europe, in order to regulate the domestic industry and to promote foreign trade. A cartel system of distribution like that of Germany (which even controls pri ces) would be too difficult to organize in a large country like China. A few strong financial interests, which were able to control coal marketing in Japan, do not exist in China. Probably market allocation and associated sales agencies, such as those existing in Great Britain prior to the present coal nationalization program, would be more applicable to China. Since the Chinese Government is likely to participate actively in coal production, it is best for the Ministry of Economic Affairs to organize a "National Association of Coal Mines" to regulate coal production, to allocate regional markets, and to organize central sales agencies. PROBABLE

EXPANSION

OF

DOMESTIC

AND

FOREIGN

COAL

MARKETS

Future Coal Markets by Consuming Areas. One of the most important industrial areas from the viewpoint of future coal markets is southern Liaoning province. Here are already located numerous chemical, light-metal, textile, processed food, and even small automobile and aircraft industries; coal liquefaction sind shale-oil distillation plants; extensive railways; a commercial port at Dairen, second only to Shanghai; and an iron and steel industry destined to become the Pittsburg of China. Coupled with the richness of raw materials and the probable great influx of capital and population, further industrial expansion, hence coal consumption, can be expected. Nevertheless, it is likely that surplus coal will still be available for southern markets and foreign trade. Another important coal-consuming area is the Yangtze Delta. In fact, most of the pre-war manufacturing and power industries of China proper were in or near Shanghai. Though devastated by war, this area holds great promise for future industrial development, not only because of the accessibility to raw materials and the relatively high purchasing power, but because it is the gateway to foreign capital and trade. Industrial coal requirements, however, must be supplemented by northern coals, and possibly coal from Formosa. The Tientsin-Tangshan industrial area is in a region of surplus coal capacity. Other raw materials such as cotton, wool, furs, flour, salt, limestone, and perhaps even Chahar iron ore, can easily be transported here. Market conditions are generally favorable, hence if more factories are built to manufacture consumer goods, especially the types for which raw materials have been exported while

16

THE

FUTURE

DEVELOPMENT

OF

similar finished goods were imported (i.e., cotton and wool and their products), industrial activity will be stimulated. The Hankow-Changsha region is also a potentially large coalconsuming area. So far only a limited number of industries have been developed to process the various agricultural goods, and produce iron, steel and non-ferrous metal products. The difficulty lies partly in the lack of cheap transport, which prevents the modernization of numerous native industries, including coal mines. The east-central Shantung region has possibilities for greater industrial development. Here there are not only the KiaochowTsinan Railway and the port of Tsingtao, but sufficient raw materials, such as coal, iron, cotton, and vegetable oils to serve as the basis of industrial development. In South China, the densely populated Pearl River Delta favors some industries, for example, silk filature, rice-processing, fruit and vegetable-canning, and non-ferrous metal plants. Even iron and steel mills are not totally out of question, if iron ores from southeastern Asia or India could be imported to supplement local and Hainan Island supplies. The coal requirements of this region can be met by the Hunan-Kwangtung border mines, Indo-China imports, and possibly coal from Formosa. Among the potential industrial areas of southwestern and northwestern China, probably the Chungking region is most promising. Coal and iron deposits occur in close proximity to each other and to the markets. To the west, in an area south of Chengtu, numerous native industries producing coal, sugar, salt, paper, silk, matches, pottery and cotton goods already exist. Further south, the Kunming area is noted for its non-ferrous metals, while also possessing adequate coal resources. The Sian-Lanchow area has possibilities because of the large coal and petroleum reserves, and production of raw cotton and wool. Still another area which favors local industrial development is Shansi province, where scattered iron deposits occur in the richest coal field of China. The main obstacle hindering industrialization in all these interior areas seems to be transportation, rather than markets. In brief, if cheap transport can be provided to promote all industries, then the coal industry can also look forward to far greater coal consumption. Future Coal Markets by Consuming Industries. Direct coal demands of the Chinese iron and steel industry, though insignificant in the past, may become very important in the future. According to the Government ten-year plan, a 5-million ton annual steel capacity

THE

CHINESE

COAL

17

INDUSTRY

is suggested. The chances for its success are good because the Japanese have already installed approximately half the capacity in Manchurian blast furnaces and semi-processing steel mills. Assuming at least two tons of coal per ton of steel production (by utilizing some scrap iron for raw material, but no oil or natural gas for heating) probably 10 to 11 million tons of coal will be needed, of which more than half must be of the coking variety. There is no way of estimating the direct coal requirements (electrical energy excluded) of other manufacturing industries. But assuming that over 10 million tons have been consumed annually in China (including Manchuria), the amount needed ten years from now will probably be over 20 million tons. Most important among these are cement and lime, clay and pottery, salt, chemical, textile, paper and food-processing, and non-ferrous metal industries. Railway consumption is also a large item in coal demands. If all rail traffic in China were restored to pre-war levels, even the present consumption would exceed 3.5 million tons per year. Hence, with the probable doubling of railroad mileage in ten years to 30,000 miles, the future consumption may be approximately 7 million tons annually. This is estimated on the assumption that greater traffic density will counterbalance increased fuel efficiency, and that oil-fired locomotives will not be used. The bunker consumption will depend, to a large extent, on the tonnage of shipping turned over to China by Japan for war reparations, and by the Allies, mainly the United States, as gifts,""It is likely, however, that China will have a total of 3 to 5 million tons of shipping by about 1957, which would probably mean from 6 to 10 million tons of coal consumption per year. The assumption is that pôwdered coal will be used instead of oil. Future coal consumption in the electric utilities will naturally be affected by hydro-electric power development. However, the latter will probably supplement steam-generated electricity rather than compete with it. Electric utilities in China now have about one million kilowatts capacity, and consume three million tons of coal annaully. If Government proposals for 6.2 million kilowatts power capacity were accomplished in ten years, possibly 4.5 million kilowatts must come from coal power. This would mean approximately 13 million-ton annual coal consumption at pre-war standards. But here, as with locomotives and steamships, it must be remembered that fuel efficiency of modern steam engines has greatly increased. One important item seldom recognized is mine consumption. *On M a r c h 1 2 , ships t o China.

1946,

the

House

of R e p r e s e n t a t i v e s

voted

to

transfer

271

snail

18

THE

FUTURE

DEVELOPMENT

OF

Modern mechanized collieries require about ξ>% of their coal output for power used directly in the mines. Hence, if China proposes to accomplish the tenth year goal of 100-million ton coal production, then 5 million tons will never appear in the market. Greater household consumption is expected in view of the much higher per capita rate of coal consumption (5 to 10 times) in large cities as compared with rural districts and smaller cities. As China becomes modernized, larger coal supplies could be made available to all persons and communities. Judging from the present domestic consumption of 12 to 13 million tons annually, it is more than likely that over 20 million tons will be so used ten years hence. Position of Coal in China's Foreign Trade. China has had an adverse trade balance since the end of the nineteenth century, though the trade of Manchuria was favorable for a short period prior to 1933. However, the situation in Manchuria later changed, mainly because of the reduced soy bean exports, and the larger imports of industrial tools and consumer goods for strategic development there. Generally speaking, China's imports of foreign machine tools, metal manufactures, transportation equipment, textile raw materials and finished goods, petroleum and chemical products, paper, timber, and even food products exceeded in value what she could export in goods, such as soy beans, wood oil, sugar, rice, tea, furs, egg products, silk, bristles, peanuts, wool, tin, tungsten and coal. The postwar picture of foreign trade should at first not radically differ from this, but the pre-war peak volume of approximately 5 billion yuan per year can probably be greatly surpassed. Since China contemplates large imports of capital goods for industrialization, she must discourage imports of luxury goods, foodstuffs, clothing, and as many consumer products as possible; at the same time, she must promote exports not. only of cheap manufactured goods, but of some excess raw materials as well. Here is where coal may play a more important part in foreign trade. China's coal trade has been rather limited in the past, as the total value, in 1936 for instance, amounted to only 55 million yuan. However,, it is important to recognize the strikingly favorable trade balance that coal has already created. This situation was manifested particularly in Manchuria where there were literally no imports, while exports usually exceeded 30 million yuan annually. In view of the large coal reserves in China, future imports from Indo-China, and Japan can, for example, be reduced to a minimum by overcoming internal transportation obstacles, with or without import tariffs. On the other hand, future exports could be greatly

THE

CHINESE

COA!

INDUSTRY

ιε

increased by government subsidies, and by providing shipping facilities. In this way; net foreign coal exports can possibly be sub stantially increased. Judging from the relatively low production costs as compared with other Asiatic countries, and from the possibility of further reduction through mechanization, it is more likely that Chinese coal can have a competitive advantage in some foreign markets. Coal exports from Poland reached as high as 15% of her total export value; from Great Britain and Germany, the figure was close to 10%. Though Chinese coal exports are unlikely tc assume such proportions, it is not inconceivable that perhaps 200 million yuan of favorable trade might be created annually. By diverting 20% of her tenth year post-war goal of 100 million tons for export, it would be possible for China not only to pay for further industrial machinery, but also to exchange coal, with which she is richly endowed, for high-grade iron, petroleum, rubber, and other raw materials, which she lacks. Even in the near future, some coal could be exported tc help cover the capital costs needed for the expansion of the Chinese coal industry. Possibility of Expanding Foreign Coal Markets. Until China is able tc produce enough textile and other consumer goods, she will probably have to continue to import them from Japan. It may also be practica] to buy some types of machinery, instrument and metal manufactures, which are less costly than U.S. products, from that country. In return, however, China has little to offer except raw cotton, wool, soy beans and coal. But since China intends to develop her textile industry, coal exports loom as a possibly important item of Sino-Japanese trade, not only because of the relative scarcity of coal in Japan, but also because of the comparatively high production costs there. Transportation charges have not been excessive, and Fushun coal was readily able to compete in Japanese markets. Though the post-war Japanese coal demands will probably be smaller, it should be remembered that Japan will no longer have access tc the 15-million ton annual coal supply formerly furnished by her wartime empire. Because of the geographical position of Manchurian and Formosan coals, it is logical to assume that China can supply the bulk of Japanese imports. Chinese coal, from Formosa in particular, but also from Hopei, Shantung and Liaoning, may find a market in the Philippine Islands, Coal reserves there are distinctly lacking, and the approximate production of 100,000 tons was only about one-fifth of annual needs prior to Pearl Harbor. Despite some water-power available, and

20

THE

FUTURE

DEVELOPMENT

OF

the accessibility of Dutch East Indies' petroleum, larger volumes of high quality coal will be demanded, especially in view of the possible development of the iron deposits in Mindanao. The Philippine Islands have more than enough iron and chromium resources to create a modern steel industry, and if the excess supply could be exchanged for Chinese coal under some barter agreement, both countries would be benefitted. Should the Dutch East Indies become industrialized, through utilization of their one billion tons of iron ore reserves and rich petroleum deposits, it would still be necessary to import high-grade coal, especially of the coking variety, for future iron and steel mills. In this potential coal market, only India has a competitive advantage over China, and that country is handicapped by limited coking coal supplies. Thus it is evident that, aside from sending textile and other cheap consumer goods to this region, it might also be possible for China to export coal in exchange for rubber and oil. Similar arrangements could possibly be made with British Malaya, which is another coal-scarce and rubber-rich country. Besides, China can utilize the 2 million annual tonnage of domestic high-grade iron ore previously exported to Japan. In Siam, China may also find a small coal market because all fuel and power sources are scarce in that country. Even in anthracite-rich IndoChina, there might be a coke market, provided that that country, possessing at least moderate quantities of most basic raw materials, should become industrialized. The Pearl River Delta would be especially interested in Indo-Chinese rubber, iron and chromium. Generally speaking, all countries in Southeastern Asia, except Indo-China, either lack coal, or have only limited reserves of lowrank, low-grade coal. On the other hand, several countries possess exportable high-grade iron and chromium ores, while others depend upon rubber and oil exports. Furthermore, all these countries are potential markets for cheap Chinese consumer goods. Hence, if a two-way traffic were established, transportation costs would be reduced to a minimum, thus making coal, as well as other products accessible to these distant markets. NECESSARY

GOVERNMENT

POLICY

Overall Plan and Coal Nationalization. An overall plan of industrialization, under the guidance of the Government, is necessary to assure China's development in the best interests of national defense and economy. Private enterprise, if uncontrolled, might

THE

CHINESE

COAL

INDUSTRY

21

create a pattern of "over capacity" in some areas and of inadequate development in others. And, since foreign participation is essential to rapid progress, there is also the danger that China might be exploited. Nor is a rigid state plan, like that of Russia, applicable, as China will be unable to secure the required capital through a reduction of the national standard of living. Furthermore, China's proverty in many natural resources makes it very difficult to pursue an independent course of action. A "middle of the road" policy is therefore advocated to govern the coal industry to nationalization. Though many coal-producing countries resort to some form of regulation, few are actually nationalizing the industry. True, statecontrol has definite advantages in that operation and marketing could be stabilized, hence over-lapping expenses reduced, and business policy centralized. However, all these aims can be achieved by the organization of the coal industry under state guidance, without government purchase of private coal mines at an expenditure of hundreds of millions of dollars. Nationalization of the coal industry has promise in Great Britain, in part because funds and efficient administrators are available; moreover, organized British labor is willing to cooperate, since the men feel that the coal industry cannot be in a more depressed state, and that they can now have a hand in bringing back prosperity to the industry. In China by contrast, federal purchase of private mines will not necessarily insure greater production. Secondly, the Government does not even have enough technical men to run the mines to be taken over from the Japanese, not to speak of the possibility of hiring political undesirables. Thirdly, the illiterate workers will not understand that the Government does not intend to exploit them, hence will see no reason why they should cooperate any more than they did with private operators. Furthermore, nationalization will kill individual initiative, which is vital in creating new productive facilities in the Chinese coal industry. Another disadvantage in nationalization is that unduly high labor costs might result. Since the Government fixes the wages, the people will vote for a government favoring high wages, which might in turn mean ever-increasing production costs without proportionate increase in efficiency. This situation might ruin Russia, except that the people there cannot vote for a second party nor oppose the government in any way. Finally, China is already experiencing great difficulty in changing over from a one-party government to a truly democratic one;

22

THE

FUTURE

DEVELOPMENT

OF

hence if too many industries, such as coal and iron and steel, were aationalized, democratization would probably be even more difficult. State Participation and Private Enterprise. Government organs, such as the Geological Survey of China and the Department of Mining, have, in the past, offered invaluable services to the Chinese mining industry in general and to coal mining in particular. However, the scope of their activities was limited by the lack of sufficient funds and men. Yet, to keep abreast with the scientific and engineering knowledge of the times, it is absolutely necessary to expand their facilities. Perhaps one solution lies in providing larger funds through the transfer of mine-tax-income from the Ministry of Finance to the logical Ministry of Economic Affairs, under which coal mining is conducted. Another method of promoting and facilitating private enterprise is the continuance of an "Industrial and Mining Adjustment Administration." Wartime assistance in the form of low-interest loans by government banks, free use of waste land, and cheap transportation by government railways, is highly commendable. The Government is also in a position to help organize coal mines into non-competitive marketing groups, as well as coordinating the devëlopment of the coal-mining industry with coal consuming industries. Actual participation in coal mining by the Government should follow an announced policy of assistance to private enterprise rather than competition with it. Fear of state interference and domination will discourage private enterprise. In 1936, there were only a few government or provincial coal mines; during the war, the number rose to over twenty; now, all the Japanese-capitalized coal mines will undoubtedly become state-owned and operated; and in the future, more state mines will probably be developed because the Government intends to "engage in enterprises which private capital is not fully capable of developing or which the Government regards as being of special importance." In view of this trend towards state participation in coal mining, it is extremely important for the Government to select officials with ability and integrity so that state mines will be well managed and private mines helped in every way. Encouragement of Foreign Participation. The quarter of a billion U.S. dollars needed for developing a tenth-year- 100-million-ton coal output nearly equals all of the Chinese industrial capital in pre-war China proper. The lack of technical men has been mentioned. Thus the coal industry, like other industries, must seek foreign aid for rapid development.

THE

CHINESE

COAL

INDUSTRY

23

Before 1931, more than half of the coal-producing investment was foreign capital. This representation was not higher because, aside from special concessions, purely foreign companies were not allowed to exist. As a consequence, several important joint enterprises, such as Kailan, Chungfu, Chinghsing, and Luta, were formed. It was subsequently discovered that by pooling resources under f o r eign technical and administrative guidance, these organizations were generally successful, especially when production-tax and maritime customs dues were partly exempted through foreign influence. Now that the rules which formally required 51% Chinese capital and a Chinese manager have been abolished, joint coal enterprises have an even brighter future. This should encourage foreign participation because the foreign shareholder should be willing to invest more in an organization in which he has greater voice. Even the Chinese shareholder will enjoy more security through knowledge that both corporate funds and mining operations will be handled under an efficient combined staff. With the passage of recent legislation permitting purely foreign manufacturing or mining companies, which have established activities of similar nature in their own country, to conduct operations in China on the same basis as those with Chinese or joint ownership, a new source of financial and technical aid is opened to China. Though not as liberal as permitting independent foreign firms to be organized, such an arrangement would greatly benefit the foreign investor, who cam have a relatively f r e e hand in operations. However, a purely foreign enterprise is less likely to be successful than a joint company, since the latter enjoys the full cooperation of the Chinese. A concession system might also aid the development of the Chinese coal industry. Possibly some mining area could be leased to foreigners, with the privilege of monopoly during the l i f e of the concession, perhaps at a guaranteed rate of return, but subject to ultimate repurchase by the Government. Certain state mines might also be financed by loans similar to those made to build railroads, where the construction and development work would be under f o r eign supervision at a commission. However, unlike the railways, it may be wise not to dispense with foreign supervision and operation altogether, since the Chinese operator still has much to learn with regard to modern technology and management. Taxation and Coal Production. P r i o r to 1930, taxation was not only complicated but excessive, the total f r o m the mineral production tax, mining area tax, land tax, native customs taxes, likin or

24

THE

FUTURE

DEVELOPMENT

OF

or transit dues, coast-trade and maritime customs duties, plus miscellaneous taxes often amounted to over 10%, not on profits, but on local market prices. For a struggling industry, this was more than enough to discourage production, because even in successful modern practice, a 15% profit on capital investments is considered high. In recent years the taxes have been somewhat reduced and simplified. For instance, the 1930 Mining Law put the mining area tax at only one Chinese cent per hectare annually for prospecting; and two cents for mining during the first five years, and five cents thereafter. However, the mineral production tax for coal was still 5% of the local market price. The interport duty was wisely abolished in 1935, and production tax exempted in the case of exports. These are steps in the right direction. The foreign student will ask why some modern mining tax system based upon profits cannot, as yet, be applied. The answer is that the company system has not been widely applied in China, that accounts are not sufficiently standardized to permit accurate appraisal of profits, and that it is difficult and expensive to maintain a special body of mine inspectors to study depletion and the like. Nevertheless, it can be argued that since most of the future production will come from modern and not native mines, the profit tax system should be eventually adopted. Besides, this form of taxation stimulates coal production because the operator knows that if his business proves a failure, he will have to suffer anyway without having to pay production taxes besides; and if his business is successful, he is entitled to a lion's share of the profits. Here is where private incentive is created. If the mine production tax cannot be immediately abolished, it must be greatly reduced. For, since many small mines, scattered all over the country, cannot be taxed anyway, why should the burden of taxation rest on the more efficient modern mines? Such high taxes will in themselves discourage development of new large-scale mines, because the margin of profit is too small. As to export exemptions, few coal mines benefit from them. If foreign coal trade is to be promoted, export subsidies on top of production tax reduction is needed. Probably nine-tenths of the money spent for coal production goes into work, material, and transportation. The indirect benefits of the nine-tenths expenditure to the state is far greater than the one-tenth of profit to the party who starts a coal company. This means that the total visible and invisible income for the Government will be larger when coal production is expanded under low taxation.

CHAPTER

INFLUENCE

OF COAL

II

ON MODERN ECONOMIC

DEVELOPMENT

Even with the possible approach of a revolutionary atomic age, the importance of coal cannot be overemphasized. So far as known today, the amount of uranium is limited, while the proven reserves of coal are sufficient to sustain the present world consumption of energy for nearly 4,000 years. Coal serves modern industry in several basic ways; in the form of coke it is indispensable to the mass production of iron and steel; it is an important raw material of the chemical industry; and it is a potent factor determining the location of manufacturing industries. In spite of the growing substitution of its chief rivals, especially petroleum, coal remains the main source of energy for modern industry and continues to provide most of the power required to move over land the commodities of present-day world commerce. At the same time, it is the biggest pay load carried by railroads and ships. Modern machine civilization thus depends on coal as on no other commodity. PHYSICAL

AND MONETARY

VA LUE

OF THE

WORLD COAL

OUTPUT

Measured in mere physical bulk of output, coal knows no rival among commodities. With the possible exception of sand and gravel, no other commercial product even approaches the mark of a billion tons transported per year which coal far exceeds. Crude oil production, nearest in rank with regard to the weight of output, has seldom been far above 200 million tons. Iron ore, which comes next, has never reached the 200 million-ton mark. A 5 billion bushel wheat crop weighs less than 150 million tons. Pig iron production has usually been less than 100 million tons. A twenty-five million bale

26

THE

FUTURE

DEVELOPMENT

OF

crop of cotton weighs less than seven million tons. In recent years the world production of coal was roughly 1-1/2 billion tons, and this is about seven times the crude oil tonnage and fifteen times the output of pig iron. During the normal year of 1939, the mine value of bituminous coal produced in the United States was 730 million US dollars as compared with 190 million dollars for anthracite, 530 million dollars for natural gas, and 1260 million dollars for crude petroleum. It took a war year, 1942 for instance, when coal production was greatly increased, to bring coal \ra.lue up to par with petroleum, approximately 1.6 billion US dollars. A 5 billion bushel wheat crop is worth 4 billion US dollars if a market price of eighty cents per bushel is assumed. A 25 million bale cotton crop is worth 1-1/4 billion US dollars at ten cents a pound. Even at two and a quarter dollars per ton, the world coal output of 1.5 billion tons would only be worth three and a half billion US dollars. It is thus apparent that coal does not rank as high in monetary value as physical volume. Indeed the relation between the low cost of coal per unit weight and the amount of work it can perform is one of the chief reasons why coal has been so widely and extensively utilized in highly industrialized countries as well as less developed areas. Two pounds of coal worth, say, one US cent at the point of utilization can do the work of a man-day. Putting coal to do the work of man means not only that man's energy can be diverted to other, more complexly useful channels, but also places at his disposal far greater power than was available in the simple coal-less age. ROLE

OF

COAL

IN

RECENT

HISTORY

Coal is recognized as one of the potent forces - perhaps even the most important single factor - in shaping human destiny during the last two centuries. To coal alone, of course, cannot be attributed all the marvelous changes which have recently come about in economics and politics. Yet as one instance of its importance, one would have to be blind indeed not to recognize the definite connection between British hegemony during the nineteenth century and the preponderance of England as a producer and especially as an exporter of coal. Similarly, the relation between Germany's ascendancy after 1870 and the development of the German coal industry, as well as the connection between the rapid rise of the United States to world power and the steep curve picturing the output of American coal; in both of these cases the basis of industrialization is too obvious. France and Germany are forever eyeing the coal

THE

CHINESE

COAL

INDUSTRY

27

deposits of Ruhr and the Saar. Japan's interest in Manchuria and north China, which finally led to war, was partly due to the rich coal deposits in those a r e a s and which Japan lacks, ^nd, of course, Russia's increased industrial might may also be attributed at least largely to the development of her coal industry during the last two decades. Even China, in her thirty-odd y e a r s as a republic, and through her civil and world w a r s , has relied on the coal industry for so much of modern transportation and electrical facilities as it possesses. The "coming of age" of coal in eighteenth-century Europe is accounted for by many f a c t o r s . Among them the most important a r e the depletion of the f o r e s t s ; the epochal discovery in 1708 of the practical application of coal to the smelting and manufacturing of iron; and the perfection of the steam engine by James Watt in the late eighteenth century. The use of coal in iron smelting meant the r e lease of the iron industry f r o m its dependence on charcoal. The importance of the steam engine to industrial production can be traced along two m a j o r lines. In the f i r s t place, it made possible the expansion of mining operations in the f o r m of pumping, hoisting, transportation and ventilation equipment, thus permitting deepe r shafts and more economical exploitation. In the second place, the steam engine brought about a phenomenal i n c r e a s e in the demand for mineral products. This last process m e r i t s some elaboration. By cheapening coal it cheapened energy and consequently reduced the cost of everything made with the aid of mechanical energy. F u r t h e r m o r e , it revolutionalized transportation by land and sea, and in so doing incredibly enhanced the usefulness of coal, and immeasurably extending its market. Made of iron or steel, indeed, the very steam engine itself, depended on coal for both its manufacture and operation. The scarcity of wood drove one shipbuilding country a f t e r another to turn to metal - f i r s t iron, then steel, and in the manufacture of these basic materials coal again proved indispensable. Coal thus became the central pillar of British maritime supremacy and throughout the nineteenth century served as the basis f o r world economics, as had no other commodity ever hitherto hailed a s king. The powerful industrial empire that Germany built for its two world wars is mainly attributable to coal; indeed, in later y e a r s 90% of the entire mineral value produced in that country was usually directly or indirectly f r o m coal. The economic history of the United States is in large part railroad history, and to this day coal is still the major source of energy which keeps the wheels of the r a i l r o a d s moving. It is a

28

THE

FUTURE

DEVELOPMENT

well-known fact that coal pays more freight per ton in proportion to its value than any other commodity. It is not well known, however, that, as a general rule, those railroads having the largest percentages of coal traffic are the most prosperous. In passing it must be emphasized that the economic importance of coal in recent years has been somewhat reduced by petroleum, natural gas, and water power. Nevertheless, in most countries, coal occurs more widely than petroleum and natural gas or is at least more actively exploited; as to water power, the initial investment in coal thermal plants is generally lower than that of hydro-electric installations. POSITION

OF

COAL

IN

THE

WORLD'S

OUTPUT

OF

WORK

How little of the world's productive work is done by human hands is seldom appreciated. It can be easily shown that mechanical power resources at present multiply an average human being's capacity to work by nearly ten times. In backward countries, like China and India, manpower still predominates; but in the United States and Canada, the energy equivalent of 40 to 45 manpowers is placed at a single person's disposal. No wonder such countries have achieved so high a general standard of living. Looking at it from another point of view, it is understandable why the United States has been called the "Arsenal of Democracy." A careful study of the power capacity will show that this country with only one-twentieth of the population of the world is doing nearly half the work. Conversely, China, in spite of her tremendous manpower of over 20% of the world's total, does only 5% of the work. This contrast should indicate to the planners of China's future development the importance of developing her power resources. Further, the importance of coal in the work output setup is undeniable. With the rise of hydro-electricity and of petroleum and gas engines, the power contribution of coal in the United States has decreased f r o m 90 to about 50% of the nation's total, and this change took place between the turn of the century and Pearl Harbor. Yet the predominance of coal in countries like Great Britain, Germany and France, which lack petroleum and water power, has little changed. Even in China, the chief source of energy other than sheer human power is coal. Hence, the relative importance of coal in China should increase when adequately developed. In comparing work output, or energy, it is necessary to find some common denominator for such unlike quantities as tons of coal, barrels of oil, cubic feet of gas, and horsepower-hours of

THE

CHINESE

COAL

INDUSTRY

29

electricity. Many scholars have sought to make such comparisons, some expressing the ratio in B.T.U. s, others in equivalent tons of coal or manpower, and still others as horsepower-hours. In terms of B.T.U.'s, conversion factors used have been of the order of 13,6000 B.T.U.'s per pound of anthracite; 12,500 B.T.U.'s (actually the pound equivalent varies from 75,00 to 14,500) per pound of bituminous coal; 6 million B.T.U.'s per barrel of crude petroleum; 1,075 B.T.U.'s per kilowatt-hour of water power. The Mineral Yearbooks of the United States Bureau of Mines usually make such comparisons on growth and change of the various sources of energy. One item that is noticeably absent from the discussions is firewood - no data on it being available. Though widely used, it does not bulk large in the total. The method of expressing the world's power in terms of tons of equivalent coal is also commonly employed. One source (1)* assumes that for the same weight coal would do 7 units of work, lignite 2.5, oil 10, natural gas 9.6, and firewood 3.6 units. In the conversion of hydro-electric power, the efficiency of thermoelectric plants has been assumed constant at 1 kilogram coal corresponding to 1 kilowatt-hour of electricity. The table in the reference only covers up till 1935, but it includes two interesting items: Lignite yielded nearly 4% of the world's output of energy in 1935, and firewood yielded nearly 13% in the same year. The development of various energy sources is shown for a period of years for the world as a whole instead of making comparisons between different countries. H. Foster Bain, recalculating T . T. Read's figures, presented a table on the relation between population and work output in terms of manpower accomplished with the aid of fuels and water power (2). He states. From these figures it will be seen that countries are powerful not in proportion to population but in proportion to work. British India, for example with 247,003,000 people exerts but a minor traction more force than France does with 39,210,000. China with four times the population of the Urited States has about one-seventh of the power •αϊ 1 references v i l i be found in the Bibliography. A number in parentheses, such a s ( l ) , denotes reference number 1. When the sane source is cited nor« than once, the page number w i l l appear in the parentheses in a l l but the f i r s t i n stance .

30

THE

FUTURE

DEVELOPMENT

OF

It is not necessary to further discuss M r . Bain's approach because it is essentially the same as Professor Read's which will next be considered. Both authors realized the importance of manpower, however small, in the world output of work. The most scientific and comprehensive study of the various sources of energy has been made by Professor Read (3), (4), (5). His three articles are clear and self-explanatory. His assumptions will be mentioned f o r those who have not had the opportunity to read them. A simplified table will be presented to show China's position in comparison with other countries, especially with regard to the status of coal. Perhaps a nation's potential powers could be best appraised by such comparisons. ...An ordinary laborer works at the rate of 1/10 horsepower. Taking into account the whole population group from new-born babies to those about to die of old-age, seasonal fluctuations in the working rate, and holidays, and reckoning on 1/30 horsepower for ten hours each day, the average daily per capita work done would be 660,000 foot-pounds The population figures I have taken from the Morid Almanac. ...The coal power was calculated on the basis of 4 pounds of coal per horsepower-hour of work;* with the exception of two countries which use large quantities of lignite, and where an adjustment was made for its lower calorific power. One barrel of crude petroleum was estimated to yield, on the average, 183 horsepower-hours of work. For water power, official statistics of actual horsepower-hours of output are available for the United States and Canada, and the U. S. Geological Survey publishes estimates of the potential water power resources of all countries. The other countries are credited with an actual output which bears the same ratio to their potential as the U.S.A. CHEMICAL

COAL

PRODUCTS

FOR

THE

FUTURE

Progress in the utilization of the commodity value of coal, through by-product coke ovens, low-temperature carbonization, hydrogénation or in other ways is certain to be slow; for in any era of price economy it is not the intrinsic value of coal tar or sulphate of ammonia which counts, but the price these by-products commands in the market. This in turn depends on the status of the chemical industry. Little is gained by producing large amounts of •Most e f f i c i e n t p l a n t s c o a l p e r horse power - hour

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1940 used work.

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THE

CHINESE

COAL

ββ

INDUSTRY

reducing labor involved without doing away with shovelling entirely. In the f i r s t category fall mobile loaders, scrapers and duck"bills; and in the second, pit-car loaders and face conveyors. The degree to which the different devices substitute mechanical power f o r manpower, and the price range is indicated by the following tabulation (55, p. 116): Type of Machine

Horsepower

P i t - c a r Loader Conveyor Duckbill Scraper Mobile Loader

1 - 5 5 -30 R 15 -30 7.5-25 22.5-50

Daily Capacity (Actual Output) 15- 25 tons 50-300 50-300 50-250 100-800

Factory P r i c e -US $ 700-1,500 1,100-2,000 1,500-2,500 1,500-2,500 6,500-13,500

R Chain type units run 5-20 and shaker drives 15-30 HP; room belts run about 5-20 and mother belts 20-30 HP. * Post-war prices are expected to be slightly higher. The scraper is a scoop device pulled by a rope operated from a hoist. It requires a freedom of motion which bars it from places where close timbering is necessary. It is most efficient in low seams with good top and bottom. Moderate pitch up to 30 degrees does not constitute a handicap. Though best for longwall, it is also used in room and pillar mining. Further expansion of its use in United States coal mines seems unlikely. The pit-car loader consists of an elevating conveyor on tracks with the upper end high enough to load the coal Into the mine car while the lower end r e s t s near the floor to permit easy shoveling. The chief setback lies in the limited capacity, and U. S. coal mines are gradually doing away with this practice. The hand-loaded conveyors are of three main types: Shaking, chain and flight, and rubber belt. These units are designed for easy portability, and can be used in both the longwall and room and pillar methods, even in moderately pitching seams. Their future is bright since they perform the functions of both transport and loading, can be easily extended, and are able to stand great abuse. The duckbill self-loading conveyor is simply a shovel device with a flared mouth attached to the end of a shaker conveyor. A differential movement pushes the duckbill forward into the pile of coal and conveys the coal backwards through shaker pans to the mine car. A duckbill has all the advantages of the shaker, besides

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THE

CHINESE

COAL

INDUSTRY

87

loading automatically. Though the width of the face covered is limited by its inability to turn angles, it is very popular, especially in the Rocky Mountain coal fields. More than half of the U. S. coal is loaded by mobile loaders. They are of two general types, namely, those employing the shoveling principle, and those using the gathering principle. Both are designed either to operate on tracks or on caterpillars. Having very large capacities, these are better adapted to high seams and large openings. Physical handicaps, aside from thin seams, have been poor roof and floor, friability of coal, and excessive impurities. Conditions in the U. S. generally favor the mobile loader. Mechanization of Auxiliary Services. Ventilation, pumping, lighting, and maintenance have reached a high degree of perfection in most large mines. These auxiliary services are in a way basic to mechanization, and naturally indispensible to even hand-mining. Some engineers claim ventilation as the prime task of operating a mine. Unquestionably, it has gained in importance because of rapid cutting, firing, and loading in modern practice. Provided that mining development is systematic, efficient ventilation is not difficult nor unduly expensive. Progress in underground lighting proceeded from the oil to the carbide lamp, and finally to the electric cap lamp. Illumination underground has been in some mines as bright as subway stations. Water has not constituted a critical problem in U. S. coal mines, · and adequate pumping facilities keep it away from the working places. Careful maintenance and extensive machine shops have expanded with increased mechanization. Mechanical Cleaning. (See Chapter IX). Since the beginning of the century, coal preparation has changed from a simple task to a process involving heavy capital investments and complex applications of mechanical and electrical energy. A 5000 ton per day anthracite cleaning plant, equipped with crushers, screens, jigs, cones, hydrotators and thickeners, costs approximately one million US dollars. This high investment is justified because of the competition from bituminous coals and other fuels. Working equipment in bituminous fields is less elaborate. Mechanization of mining has generally r e duced costs; but mechanization of coal preparation, though turning out better and more uniform products, has increased production cost without producing a higher selling price. The need for large preparation plants, prompted by marketing is intensified by mechanization, especially the loading machine. As a result, the percentage of coal mechanically cleaned increased from

88

THE

FUTURE

DEVELOPMENT

OF

a low of 10% in 1933 to a figure of 25.5% attained in 1943 ( 53). Some Social Causes and Consequences of Mechanization. Mechanization in coal mining conforms to a pattern typical of American industry, though recent changes are moderate in comparison with other industries. The rising standards of living, the pressure against wage differentials in coal regions through efforts of organized labor, and the intense competition for markets between coal companies, coal fields, oil, gas, and water power, have left the industry with no alternative but to seek lower production costs through mechanization. This tendency will probably be accentuated in the post-war era. A high degree of mechanization affects the kind of worker needed. Certain old skills are no longer required, though familiarity with underground hazards remains essential. The machines put a premium on quick reaction time, adaptability, intelligence, mechanical knowledge, and the ability to work under supervision. They favor younger men, and the prospect of working up to machine jobs tends to attract youths with better education who formerly had no interest in the mines. The high level of American public education is in a position to furnish this type of men so essential to mechanization. Another social consequence of. mechanization is the possible introduction of new accident hazards. The machines may cause excessive dust, but dust control methods have more than overcome this. Rapid mining may not allow time for roof to settle thus increasing rock falls. More accidents may result from handling heavy machinery and operating these at high speeds. Yet, despite possible new hazards of mechanization, well-managed companies have been able to keep the accident rate down through intensified safety programs. This statement should refute the common misconception that mechanization necessarily means greater danger to the working men. The following table (58) shows that firstly, the accident frequency of all US bituminous mines has decreased with increased mechanical loading, though a cause-and-effect relationship cannot be established; and secondly, the same tendency accentuated in the most mechanized state of Wyoming. In fact, the "Sentinels of Safety Trophies" have been generally won by mechanized mines in recent years. The long run effects of mechanization are clearly favorable to the coal miner. They lighten his labor, increase his productivity, facilitate the payment of adequate wages, and strengthen the position of the coal industry.

THE

CHINESE

COAL

Production per manhour underground (short tons)

Accident frequency per million man-hours underground

Accident frequency per million tons output underground

13.1 12.3 12.0 20.2 26.7 31.0

0.71 0.72 0.67 0.74 0.77 0.79

100.5 91.1 86.1 87.4 82.7 77.8

141.3 126.9 129.4 118.9 108.1 99.2

56.6 66.2 75.8 92.2 94.2 94.2

1.01 1.05 1.03 1.19 1.19 1.19

143.5 66.0 68.4 54.4 53.3 50.4

141.4 62.6 66.3 49.9 45.0 42.3

Percent of production loaded mechanically US Bituminous Coal 1931 1932 1933 1937 1938 1939

89

INDUSTRY

Wyoming 1931 1932 1933 1937 1938 1939

EXTENT OF PROBABLE

MECHANIZATION

IN

CHINA·

Prefacing the discussion of probable mechanization in Chinese coal mines, it should be noted that "the actual cost is about the same as with good work in America when equal annual tonnages are handled, despite the more difficult mining conditions. The best cost realized in China...is low even compared with American standards...." (52, p. 65). However, one must not be misled by this fact because the lower costs in US dollars may be offset by the adverse rate of exchange of the yuan and the lower purchasing power of the Chinese. To satisfy the Chinese economy, lower coal mining costs must be achieved along with other improvements. Labor costs have been slowly increasing, and the time will eventually come when more labor saving devices must be introduced. Conversely, a higher standard of living will depend on mechanization. It may not be worthwhile to equip or modernize depleted old workings, but for promising virgin fields, this task is important. Historically, the *A11 c o a t · a r e c a l c u l a t e d f r o · a a a u a i n g t h e o r e w a r r a t e U.S. d o l - l a r and C h i n e a e y u a n a t a p p r o x i m a t e l y 1 : 3 .

of e x c h a n g e b e t w e e n

the

00

THB FUTURE

DEVELOPMENT

OF

larger mines in China, which have taken advantage of technology In coordination with utilizing cheaper labor, are inclined to give higher wages and show more profits. These facts seem to indicate that the trend towards mechanization will be successful in China too. Minimum Basic Equipment Needed. Of fundamental importance is the mechanization of basic services such as power houses, either steam or electric, hoisting apparatus, pumping facilities, and ventilation equipment. Without these, no mine claiming to be in any sense "modern" can operate beyond a limited depth. To dig a hole in the ground is one thing, but to run a mine, which is like a factory, is entirely different. (1) Some form of power plant is absolutely essential. Electric power, if not available from public utilities, may be generated by a single or a group of coal companies. Sometimes, due to low fuel costs, it may be profitable to invèst in a power plant intended also to supply electricity to nearby communities. The foundation of coal mechanization can be thus laid in coordination with overall industrial development in China. (2) There must be sufficient hoisting apparatus. Drift mining is uncommon in China and even so, hoisting engines, either steam or electric, are needed between levels and on coal planes. Low-priced labor can never offer any competition, on a large scale, to mechanical hoisting. (3) There must be efficient water control and adequate pumping facilities which Chinese mines generally lack. It is better to invest in such machinery and keep the mine going than to shut down three or four months a year. Should the cost of investment far exceed that of work stoppage, then it is better not to run the mine at all. Electrically driven pumps have outmoded steam and are preferable to compressed-air pumps in modern coal mining practice. (4) Main fans and booster fans are also important, since natural ventilation, even at its best, is undependable and quite insufficient to reach the working faces. A detailed systematic plan of mine layout will provide a cheap supply of good air essential for greater working efficiency. This need is accentuated by mechanization because rapid operations create dust and liberate dangerous gases quicker. Ventilation equipment, like everything else, is predominantly powered by electricity. Mechanical Haulage Important for Large Outputs. Human power can be utilized to push a limited number of coal cars in a small mine. But when the distances underground are great and tonnage

THE

CHINESE

COAL

INDUSTRY

Θ1

large, this practice becomes expensive in spite of the cheapness of labor. When two men deliver a two-ton load and return the "empty" a mile from the shaft, the time required will be nearly two hours. Assuming an 8-hour shift and a yuan per day wages for the two men, this item of transportation (on the main-line haulage) alone would amount to 12.5 Chinese cents per ton. Besides the large number of coal cars would congest the haulage ways, unless additional investment is made both in driving larger entries or providing extra switches and tracks. The task for the laborers is not only arduous but insurmountable if slight grades are encountered. The use of mules or horses is somewhat cheaper than manpower. Let us assume that a team of mules can drag a "seven-car trip" of 15 tons (a horse is probably ten times as strong as man). The investment costs amount to say 20 cents per day, derived from the assumption that two mules cost 180 yuan and can live 900 working days. Now it takes two men to drive them or approximately one yuan wages per day. The feed of the mules and the upkeep of the underground barn probably runs as high as four yuan per day. The total would be over 5 yuan. Assuming six trips for the mules instead of four for men in a shift, or 90 tons, then the cost of animal transportation would be about six Chinese cents per ton. Considering electric locomotives, the accepted form of modern underground haulage, a 10-ton, 100 h.p. "motor" would cost approximately 30,000 yuan, and its life will be about 15 years, or a yearly initial cost of 2000 yuan and daily cost of about 7 yuan. The investment of the trolley wire (and bonds) is incalculable because it is used for transmitting electricity for other machinery too, but, let us say, 3 yuan per day; maintenance and wages for two men amount to about 5 yuan; and power costs 15 cents (Chinese) per kilowatthour for slightly over 200 kilowatt-hours comes to 30 yuan. The total expenses per day would be 45 yuan. The "motor" pulling a load of 25 tons could traverse the one-mile course (and return) in less than half hour, or in round figures 50 tons per hour. This would mean approximately 400 tons per eight hour shift for 45 yuan, or 11 cents per ton. Generally speaking, the locomotive can work two 8-hour shifts, while the maximum for animals in 24 hours is 12 hours. Hence, the cost per ton is not much higher than mule transportation. By using the speedy trolley locomotive, which can travel three times as fast as the mule, further savings could be made through the elimination of some wide gangways, excess track, switches and frogs needed for return "empties."

92

THE

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DEVELOPMENT

OF

All the above figures are not necessarily precise but of the right order of magnitude. It can be concluded that manpower for mainline haulage purposes is definitely out of date in modern mining. Animal power can compete favorably with electric power under present Chinese conditions. But when the load-factor of the "motor" becomes greater; the electric power factor cheaper, and manpower more expensive, then the mule must give way to the "motor" in China. This prospect is not very far off. Even now, the author suggests that the electric locomotive should be used for main-line haulage for large mines; while mules or horses be used for gathering purposes. The time for he battery locomotive has not yet come; but cable reels for the trolley "motor" should be used whenever possible. Cutting Machine Only Partially Applicable. Widespread occurrences of pitching ground limit the use of undercutters in Chinese coal mines. It is probable that their application can never approach American standards, even should mining be completely mechanized in China. Nevertheless, under favorable conditions of relatively level coal occurring in thick seams, undercutters could be successfully used. Friable coal is an advantage rather than a handicap. A modern undercutter can easily cut 150 tons of coal per shift; while a Chinese miner with hammer, chisel and pick can only cut from one to one-and-a-half tons, even assuming he does nothing else. The cost per ton for hand-cutting would hence be about 40 Chinese cents. With a hand auger, the miner can perform at slightly lower costs. But with the undercutter, the cost per ton could be reduced to 20 Chinese cents as shown below: A machine costing 15,000 yuan with a five-year life would correspond to approximately 10 yuan per day; to this should be added a maximum of 20 yuan for power, labor, and maintenance; the total of thirty yuan divided by 150 tons per shift would mean 20 Chinese cents. This calculation is based upon one shift, hence actual costs could be further reduced by two-shift application. Powder costs would also be less here. Provided that conditions are favorable, it may be concluded that the undercutter could be advantageously used even in present-day China. Another mining machine which, in contrast, could be widely applied, is the standard hand electric drill. This costs less than one thousand yuan, and can be used for two or three years. Assuming a 750 working-day life, the initial costs per shift would be 1.33 yuan. Together with power, maintenance (chiefly sharpening), and two hour labor costs of, say, three men; the total cost per day cannot exceed 5 yuan. This little drill can easily cut 35 tons of coal in two

THE

CHINESE

C0A1

INDUSTRY

93

hours, which means that the cutting costs is only 15 Chinese cents per ton. Further savings could be made through ready application on a two-shift basis. The advantage of this drill over hand-cutting is strikingly apparent. It is believed that the electric drill can be introduced as soon as electric power is introduced underground in any coal mine. Though more suitable for level seams, it could be used in pitch mining. For "top holes" in high seams, a stationary type braced by pipes could be used. Hand augers could be profitably used before electric drills are installed. Other cutters, notably jackhammers, are applicable for cutting low seams of pitched coal. These are needed anyway in conjunction with the necessary rock-driving work connected with coal mining. Some Types of Mechanical Loaders Advocated for Use. The hand miner s most arduous task is shoveling coal into mine cars. When the tonnage is limited, working place high, and distance to mine car short, hand loading is not too tiresome or slow. But when adverse conditions exist, such as lying on your back, shoveling and then relaying the coal several times before reaching the mine car in the gangway, hand loading is not even practical. The author believes that some simpler types of mechanical loaders could be advantageously introduced. Mobile loaders seem to be inapplicable at present because they are best for handling large volumes of coal in level seams. The most promising type is probably the shaker conveyor (with or without self-loading attachment), which could be conveniently used up to a 20% grade in high or low seams, and in working places 100 feet from the haulage way. Tracks and "buggies" are not necessary, only pans. They are wedged in place near the tramway, and the pans extending into the working place can stand great abuse. The cost of a fifteen horsepower "shaker" (without duckbill), whose life is perhaps five years, is about 6000 yuan. The depreciation is hence about 4 yuan per day. Together with other costs, less than 15 yuan is needed for conveying 40 tons of coal to the mine cars.* This corresponds to less than 40 Chinese cents per ton, assuming it operates only three hours in one shift (for two shifts, the figure would be near 35 cents). On the other hand, one able-bodied man can load, say, seven tons per 8-hour shift from ten feet surrounding the mine car. At 50 cents per man-day, the tonnage cost is about 7 cents. However, such conditions seldom exist. In reality, chambers are often driven 100 feet long which means that the man * I f Machine operated continuoua1 y, at l e a s t 100 tona could be tranaported.

X

94

THE

FUTURE

DEVELOPMENT

OF

at the face must, on the average, shovel 50 feet to the tramway. Assuming that he can throw the coal ten feet, then he needs to shovel at least five times before getting the coal into the mine car. This rehandling causes excessive breakage. Instead of 7 cents per ton, the actual figure would be close to 35 cents. The efficiency of hand loading further decreases in pitched or low seams, while the shaker remains the same. It is true that manpower is still cheaper than the shaker in most cases, but with the expected rise in labor costs, the scale might soon tip in favor of the latter. Certainly, in some regions, the shaker could be profitably used even now. The scraper also-has its possibilities, especially in a longwall face or thin seams. The cost picture is similar to the shaker, but both the initial investment and maintenance are slightly higher. Since most of the Chinese coal seams are relatively thick, the need for scrapers is not urgent. The author recommends it for flat or pitching longwall operations. The pit-car loader, although somewhat cheaper, has no value for transporting coal from the face to the tramway. It saves half the labor of loading into the mine car; but can only be used when tracks are built, in a seam higher than four feet, right up to the face. Because of the low tonnage handled, the cost factor in relation to hand loading does not justify its present use in China. Chain conveyors, under certain circumstances, metal sheets, and chutes are devices which can facilitate loading in the pitching seams of China. Men and Machinery. Like other industries in China, coal mining will be handicapped by a lack of sufficiently trained men to handle modern machinery. Traditionally, Chinese workmen, unaccustomed to mechanical equipment, do not know how to take care of it even though they might easily be taught to do so. The importance of maintenance must be stressed, especially to newly recruited men, who should be taught the right habits. By temporarily increasing the number of supervisors and conducting training courses, the Chinese miner should adjust himself to mechanical equipment. A large number of old-time miners from Europe who migrated to America quickly acquired the art of mechanized mining. An impetus for looking after machinery is given to contract miners through a realistic understanding that work stoppage means less pay. A steady crew of maintenance men also helps. Similarly, Chinese coal miners, though less industrially minded, could also learn the technique, at perhaps a slower rate. Partial mechanization, even in China, is inevitable. Hence, the coal operators might well prepare for the future by investing money for training industrially minded and technically skilled workmen.

CHAPTER

ΠΙ

THE PROBLEM OF COAL LABOR As in other industries, labor will be a controlling factor in the development oí the coal industry. China's industrial manpower has great potentialities, but the current condition of the labor market there makes the goal of sufficient skilled workers employed under good working conditions still seem far off. The very fact that people do work for what amounts to bare subsistence, that slavery and contract labor continue, that emigration is imperative and that there are bandit hordes and agricultural unrest, are evidences of the colossal proportions of the problem (59). Despite the low living standard in China, where people are willing to work for anything, there is still unemployment. True, the modern power-generating and power-consuming industries are becoming increasingly important in their absorption of excess farm labor into industrial employment; but, as yet, the small and unstable markets for the products of these industries have limited their output, and, hence, their employment capacity. Furthermore, the workers have been recruited mostly through contractors, thus at times, creating the situation whereby labor may be there but unavailable because it cannot be hired directly by management. Chinese industrial labor, although seemingly docile under the control of contractors and politicians, is potentially violent in struggling to free itself from the bondage of semi-feudal and semicolonial conditions. Although organization of labor in China r e ceived an impetus during the revolution, it has not yet had the time to develop as in western countries. When the opportunity comes,

θβ

THE

FUTURE

DEVELOPMENT

OF

it should be in a position to improve working conditions and hence provide more skilled laborers for industrial development. BACKGROUND

OF

CHINESE

LABOR

Agricultural Traditions. Between 75 and 80% of the population of China make their living from cultivating the soil. Indeed agriculture formed the foundation of the social and economic structure of China. Any attempt at industrialization must be coordinated with agrarian reform. Otherwise, there will not be sufficient industrial materials from the farms, nor will there be a prosperous agricultural population essential to the development of large domestic markets to support the modern industries of China. Industry must also rely upon the farm community to furnish its labor supply; hence, the agricultural background has an important effect on the labor problem in China. A short discussion of agricultural conditions will show that the labor supply for industry can be easily drawn from the farm population. Most of China is an old land of stabilized agriculture where the soil is very thoroughly cultivated. Crop yields per acre are high, but this is achieved through the most intensive hand labor practices and the resulting per capita output is low. Greater yields are difficult to secure without increased expenditures for fertilizers, machiners, or reclamation. "Too many people on too little land" is a phenomenon which characterizes Chinese agriculture. Floods, famines and political turmoil have further increased the population pressure on the land. To have some of the farmers go into industry would be beneficial both to those who go and to those who remain. The former may earn a better living in industry and the latter will receive a proportionately larger share of the farm yields even without agricultural mechanization. This ultimately leads to a higher standard of living. Industry in China now draws about half of its unskilled male labor from farm hands. Of the remainder, most were former city coolies and soldiers both of whom may at one time have been refugees from farms with which they consequently lost contact. The labor for the coal industry, far from being an exception, is more closely connected with agricultural labor than other industries; over half of the "modern* coal mining labor in China proper comes from the farms and the percentage in Manchuria is even higher. Nor should it be forgotten that in many native coal mines, mining is only a by-product of local farms, since the mines are worked by the farmer only in "slack* season.

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The agricultural origin of the workers is clearly reflected in the high labor turnover in modern collieries. A study by the South Manchuria Railway Company reveals the following facts about the mine laborers (60). Fourteen coal mines in Manchuria employed 55, 691 men and released 51,156 men in 1934; and 82% of those who left had been employed for less than three years. Unless living conditions for the miners can be improved to accommodate their families too, they will probably continue to return to the farms after saving some money. The situation in China proper is similar though not as acute. Some collieries, in attempting to remedy such instability of the labor force, offered bonuses to their workers for longtime attendance and invested money in better housing facilities; while others tried to maintain am extra supply of labor for such eventualities. The agricultural background of the miner affects the coal industry in another way. During the lunar New Year festivals, the majority of the workers leave the mines for their homes in farming villages, thus causing regular operations at the collieries to be suspended from 15 to 50 days (61). Even the Kailan mines had to suspend operations for one month at the end of 1936 (62); this explains why the first two months of the lunar year are months of very low production. Evidently most of the miners, unlike the factory workers, have not adjusted themselves to urban and industrial habits of living. Contract System. Among the social and economic evils of the Chinese labor system, especially in the coal industry, there a r e few which are more effective in retarding the rise of labor standards than the so-called "contract system." The contractors in the Chinese coal industry not only hire but also exercise financial control over more than half of the miners. Contract mining in China is quite different from what the same term implies in coal mines in the United States. For in the latter country, the "laborers" cannot be abused by the "miner" who a s sumes no more responsibility than does the captain of a team directed by the coach, who, in this case, is the mine superintendent. The "miner" has a few "laborers" under him and earns only the additional amount commensurate to his responsibility, and like his "laborers," he receives his wages directly from the mine management. In the western practice of "contract mining," the workers are provided with the incentive of increased pay for harder work, but in China they commonly work harder only to fatten the contractor's purse. The contractor in China, who may have 100 or more

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men and several sub-contractors working for him certainly has a profitable job. Under the old contract system practiced in most of the Chinese coal mines, the task of securing workers, the supervision of the work and the payment of wages to individual laborers are delegated to a number erf contractors known as Pao-t'ou, Pao-kung-t'ou, or Pa-t'ou. Although details of the arrangements made between the management and the contractors might vary at different mines, the system involves in essence the letting out to contractors of various types of work, chiefly that of coal cutting and haulage, at agreed rates of payment for certain units of work done, such as the quantity of coal mined or transported. The contractors are accountable to the management primarily for executing the Jobs allotted to them within a specific time. Hence, mine owners are usually not interested as to how labor is treated and paid, and sometimes even leave the method and zone of operations to the contractors. A milder and more modern form of the contract system limits the role of the contractor to the hiring of labor only, leaving the supervision of the work in the hands of the management. In this case the contractor is given the nominal post of foreman with the responsibility of supplying the necessary workmen; but not that of delivering a definite quantity of output. As under the former mentioned type of contract system, the management nearly always pays wages to the workers indirectly through the contractor. Whatever the schedule of wages may be, the total amount of which the management pays to the contractor, the miners receive them from the latter, not according to the original scale, but reduced by a percentage fixed beforehand in their hire agreement with the contractor, leaving the remainder as profit to the latter. A "squeeze* of 10 to 20% of the wages is common, and through tradition regarded as legitimate. The obligations of the contractor to the laborers often include arrangements for room and board. Occasionally, the sick and injured are taken care of, but usually these are sent home with the necessary travelling expenses. A free coffin for a killed workman is perhaps the greatest obligation of the contractors I The business of contracting labor resembles a racket, especially when the contractor has a free hand. Most contractors maintain their own offices and keep their own accounts. In some districts, they also have to pay taxes to the local authorities for conducting their business. In connection with coal mine operations, the management usually furnish the heavier and more permanent types of equipment

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and supplies, while the contractor is responsible for the smaller and more consumable units. The contract system does have its advantages. It is indispensable to foreign employers and Chinese mine superintendents who are more interested in accomplishing a certain amount of work than in dealing with labor. In fact, the delegation of responsibility to the contractor or to even less competent men down through the ranks is a tradition deeply ingrained in the Chinese way of life. Nevertheless, the evils far outweigh the benefits, and the Chinese laborers, and sometimes the management, suffer as a consequence. Even under conditions where the contractor is responsible only for hiring labor, the abuses could be considerable. The large commission from the workers has been mentioned. Sometimes increases in wages or bonuses are pocketed by the contractors; or advance wages paid by the management may be temporarily kept by the contractor thus delaying payment. The workers are often overcharged for room and board, commonly provided by the contractor. Exploitation of labor in the worst form consists of employing temporary workers as "cash coolies.* These men who are at the point of starvation, are willing to work for half pay, while the contractor pockets the other half received from the management. Hence, in order to secure permanent positions, the "cash coolies* are often willing to pay one hundred yuan for each job. When the supervision of work is not under the management the situation is even worse. The contractor, in mining coal at the lowest costs, may ruin the economic development of the mine forever. He can also exploit the laborers by paying them low fixed wages, while working them to the limit of physical endurance. Sometimes only 40% of the amount paid to the contractor actually reaches the laborers. In either case, the average miner is continuously in debt to the contractor for monetary advances for clothing, room and board, amounts sent home, gambling debts, and what not. So when payday comes, he does not see the money for long. Indeed the miner is forever under the thumb of the contractor, who is all powerful and socially monopolistic in controlling his very livelihood. Both labor and management are trying to modify or abolish this corrupt Chinese "contract system.* At Kalian strong unions finally did away with the "cash coolies,* and have frequently agitated to alter other aspects of the contract system. In some large modern mines where the contractor has not been able to supply all the necessary labor, the management has been partly successful in es-

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tablishing closer control over the rightful compensation and working conditions of labor. In several cases, the management has r e quired contractors to report periodically the amount of wages paid to the workers. At the same time, the management itself employed supervisors and foremen in increasing numbers. At Fushun, changes were made in the "contract system" so that wages are paid directly by the management to the workers according to the amount of work done. Under this plan, the contractors, acting also as foremen and sub-foremen, are paid 11.5% of the total wages of the workers under their supervision (63). The fact that such high compensation is still granted in the largest coal mining company in China shows how deeply-rooted the contract system is implanted in the industry. A modification of the contract system, similar to that at Fushun, was adopted by Kailan at Chinwangtao for the workers employed in the loading of coal. Under the "gang* system, contractors were required to pay a minimum of forty-two cents per man-day and to post individual and "gang" wages periodically (61, p. 249). The medium-sized Mentoukou Chungying Company is one of the few modern mines which have succeeded in abolishing the contract system. In 1928, all the contractors were discharged, and twenty of the company's foremen were appointed in their place to hire labor directly for the company. It is claimed that many evils of the former system were thus abolished. Several other mines have reported similar changes. However, even to this day, the influence of local customs inspires in labor awe of the power of contractors, and this indirectly deters management from dispensing with the contract system altogether. EMPLOYMENT

IN C H I N E S E C O A L M I N E S

Official mine labor statistics in China are both few and incomplete. One of the primary reasons for this is that the Governm'ent has been unable to enforce strict, registration and centralize mine supervision. Some general appraisal of the coal mining labor situation, however, can be derived from piecing together the official statistics with those from private sources. It must be cautioned, however, that as a result of wartime changes in the coastal areas during Japanese occupation, the development of southwest China, and the obscure situation existing in Manchuria, it is difficult to arrive at definite conclusions which would be representative of the coal mining labor situation in China's peacetime economy. If it were possible to obtain a sufficient number of operation re-

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ports from the individual mines, a concrete appraisal might be given. Unfortunately, less than half a dozen truly "modern" mines supply such information. The majority of some three dozen "semimodern mines" which use machinery only in connection with hoisting and sometimes transportation, do not always have complete records. The statistics are so faulty because of a customary and persistent disregard of either contract labor as a whole or surface labor. Some mines intentionally give lower figures in order to boast of higher efficiency, but upon examining their per capita output in comparison with "modern mines," the exaggeration is at once detected. Official statistics on coal labor are derived by totaling all reports received, hence tend to be lower than reality. Precise information on "native mines" is unattainable, although sample studies on efficiency have been made.* Yet these native miners cannot be ignored because they contribute a substantial volume of coal output. Estimates on the number of native miners, aside from that made by Torgasheff, are low because their e f f i ciency has been assumed to correspond with those of the "semimodern mines." Total Number of Workers. Torgasheff, a mining engineer, estimâtes the total number of workers (including contract labor) in the coal mines of China Proper and Manchuria for the period befor 1930, at the minimum figure of 600,000 (63, pp. 72-3). This figure includes 100,000 in the Fushun and Kailan mines, 110,600 in the semi-modern mines, and the rest in native mines. T. F. Hou of the Geological Survey of China, gives a total of nearly 170,000 coal workers for 1934, of which 96,000 were in Manchuria and 171,000 in China Proper (65). The former Ministry of Industry estimates 216,000 coal mining workers in 22 provinces •Daily Per Capita Output of Coal Labor, 1928 (63, p. 38) ( A l l labor included) Mine Fnahun Coal Mine Kailan Coal Mine Beat Semi-modern Mines Other Large Mines of Semi-modern Type Smaller Minea of Semi-nodern Type Best Native Mines Small Native Mines Average of a l l Chinese minea Average of European mines

Kilogram 377 368 333 230 150 100 50 204 803

X U. S. Rate 9.2 9.0 8.1 5.6 3.7 2.4 1.2 on'2 20.0

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of China Proper, constituting nearly half of the total mining labor in this area (66). Thus the total, including Manchuria, would be in excess of 300,000 according to the above source. The ¿hina Labor Yearbook gives 165,000 coal miners for forty larger mines in 1933. This survey, however, was limited to thirteen provinces and did not include the four northeastern provinces and the southwest. Aside from the last reference, all figures include an estimate on the probable number of workers in the "native coal mines* of China. Upon analysis of the above sources of information, the first conclusion gathered is that the number of workers in the "modern'' and "semi-modern* coal mines of the coastal provinces in China Proper was at least 135,000 in 1933.* But judging from the 3,000,000 ton increase in the production of coal in China Proper between 1933 and 1936 (chiefly in central and southern China), it -seems reasonable to suggest 150,000 for this region in 1936, the last normal year. In Manchuria, Fushun alone has the minimum of 60,000 workers and its production according to Japanese sources has been less than half the total for that area in recent years. Assuming that the efficiency of the ether mines is not as high as that of a mechanized mine like Fushun, the number of these workers should be at least 70,000. Thus the total in Manchuria probably exceeds 130,000.* In Southwest China, many mines have been developed during the war and the production must be in the neighborhood of 4,000,000 tons in contrast with 1,000,000 tons in 1934. About half the output is presumably from semi-modern mines, hence the number of men employed must be close to 20,000.* Adding the three areas together, we may suppose that under postwar peacetime conditions approximately 300,000 coal miners will be needed in existing "modern* and "semi-modern* mines. This figure exceeds Torgasheff's estimate, based upon m i n i n g reports and efficiency calculations, by nearly 100,000 which in turn corresponds to the increased employment resulting from higher production in recent years. The greatest difficulty in the estimation of coal workers is native miners. In Shansi alone, the number has been estimated at ' A l l o w i n g 3 0 , 0 0 0 w o r k e r a w h i c h l i g h t be c a l l e d " n a t i v e L a b o r Y e a r b o o k f i g u r e of 1 6 5 , 0 0 0 p r e v i o u s l y a e n t i o n e d .

B i n e r a " in the

China

¿fin Modern C h i n e s e n i n e s , l i k e Fushnn and K a i l a n , a b o u t 1 0 0 , 0 0 0 « e r e n e e d e d r o d u c e 12 a i l l i o n t o n s of c o a l p e r y e a r ; h e n c e , i t i s l o g i c a l t o i i i u a e t h a t e s s t 2 0 , 0 0 0 s e n a r e n e e d e d t o p r o d u c e 2 a i l l i o n t o n a i n s e a i - a o d e r n a i n e s of Southwest China.

Î

to st

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56,000 (67). The Geological Survey and the former Ministry of Industry of China seem to have placed the figure far too low; and the Department of Mining, now under the Ministry of Economic Affairs, has not made a report during wartime. Since the number of workers in larger mines in China Proper exceeds 170,000,* the estimate of the Geological Survey at 171,000 and that of the Ministry of Industry at 216,000 do not allow for the native workers who extract perhaps 7,000,000 tons of coal per year. Now, if Kalian needs 40,000 men to produce five million tons of coal, thus on the basis of efficiency studies which show about four "native" miners doing the work of one "modern" miner, the number of native miners should not be less than 200,000 to produce 7 million tons of coal. The same may be said for Manchuria. To be conservative, however, let us exclude the native miners in that area. Nevertheless, the total number cannot be less than 200,000 when one takes into consideration the quantity of native coal miners surrounding each mining district. We thus arrive at the conclusion that half a million workers, roughly composed of 300,000 modern and semi-modern miners and 200,000 native miners can be employed in existing Chinese coal mines. This exceeds the pre-war official estimates by about 200,000; and is slightly less than Torgasheff's figure, which, though scientific, seems to have been derived from over-emphasis upon the total output of primitive mines and the low individual efficiency of the native coal miners. The resulting half million figure for coal miners constitutes about 50% of all mine labor, and one-tenth of 1% of the population of China. The modern and semi-modern coal miners represent about 10% of the industrial workers; and the native coal laborers constitute perhaps 2% of the handicraft workers in China. A Picture of Some Individual Mines. Practically all of the coal mines have been shut down at one time or another. Hence, any evaluation of the number of workers must be made on the assumption that the mine in question is operating at full capacity. (1) The Fushun coal mine, Liaoning province, now has an annual capacity of about 9-10 million tons, and employs at least 60,000 men; two-thirds of the workers are in direct employ, and the rest on contract. It is not known whether the Japanese have been able to break up the corrupt contract system completely. (2) The five Kailan Coal Mines at Luan-hsien, Hopei, can easily 'At derived f r o · previous d i s c o a a i o · .

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produce over five million tons annually. The Tang-shan mine employs 7,000 men; the Lin-hsi mine employs 10,000; the Machia-kou mine employs 6,000; the Chao-ke-chuang mine employs 11,000; and the T'ang-chia-chuang mine employs 7,000. Of the approximately 40,000 workers, about 60% are contract labor and 40% direct company labor (68). (3) The Chunghsing Company, Yihsien, Shantung has a capacity of about 1.5 million tons annually, and can employ between 10,000 and 12,000 workers (69, pp. 1-3).* Over 60% of them are contract workers. (4) The Chungfu Joint Administration, Honan, produces upwards of one million tons of anthracite, for which over 11,000 workers are usually employed (67). About 70% of the labor are on contract. (5) The Huainan Mining Administration, northern Anhui province, can produce over one million tons of coal annually. Assuming an efficiency slightly lower than that of the most modern mines, over 10,000 workers would be employed. (6) The Penhsihu Coal Mine, Liaoning province, produced about 800,000# tons annually, and employed about 7,000 workers* (7) The Hsian Coal Mine, northern Liaoning, has risen in importance in recent years and now has a capacity of nearly one million tons annually. The efficiency is probably not lower than a mine like Penhsihu, hence, there should be 9,000 men employed. (8) The Luta Mine of northern Shantung province has a capacity of 700,000 tons for which at least 7,000 men are needed. (9) The Liuhokou Mine has a capacity of 800,000 tons annually, though the production in recent years fluctuated from half a million tons up. For maximum output, at least 8,000 men are needed because of the inefficient management of the mine. The amount of contract labor is in excess of 75%. (10) The Chinghsing Mine, Hopei, has a capacity of perhaps 700,000 tons annually, though production recent years seldom has exceeded 600,000. For maximum output, amy labor figure under 7,000 is impossible because the extent of mechanization limits the per capita output of the mine. (11) Several mines in Shansi, including Chin-pei, Yang-chuan• T h i s r e f e r e n c e s t a t e s t h a t 2 , 0 8 1 i n t e r n a l « o r k e r s and 3 , 3 0 8 c o n t r a c t w o r k e r s o r a t o t a l o f 5 , 3 8 4 a r e e m p l o y e d t o p r o d u c e 8 0 0 , 0 0 0 t o n s of c o a l i n 1 9 3 1 r i g h t a f t e r r e o p e n i n g the n i n e . I n 1936, the o u t p u t v a s c l o s e t o 1 . 5 m i l l i o n t o n s ; h e n c e , t h e men e m p l o y e d w o u l d be n e a r l y d o u b l e t h e 1 9 3 1 f i g u r e . #It

is claimed t h a t 2,200,000 tons vere produced in

1940.

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pao-chin, and Tatu/ig-pao-chin, have a total capacity in excess of one million tons. Though reports on the number of workers show higher efficiency than Kailan or Fushun, the author cannot suggest anything less than 10,000 on technical grounds. (12) The smaller semi-modern mines in Manchuria like Peipiao, Mishan, Hekang, Yentai, Naitzushan, Fuchouwan, Pataohao, Huoshiling, Niuhsintai, Fushin, and Tungpientao contribute a total of at least five million tons annually. Besides, several of these have great potentialities. These mines probably employ a good 50,000 workers. There are at least a dozen more large semi-modern mines, such as Lincheng, Liukiang and Chungying of Hopei; Pinghsiang of Kiangsi; Changhsing of Chekiang; Huatung (formerly Chiawang) of Kiangsu; Liling of Hunan; Fuyuan of Hupei; Fukuo of Kwangtung; and Tienfu, Paoyuan, and Chiayang of Szechuan. These mines employ more men per ton of coal produced because of lower efficiency. As a whole, coal mines with an annual output of half a million to one million tons employ from 4 to 10 thousand men; while those with 100,000 to 500,000 tons employ 1,000 to 6,000 men. The percentage of contract labor is usually between 60 and 75%, being higher for less modern mines. Characteristics of the Labor Force. The total number of persons employed in the industry is, however, of little significance without some knowledge of the characteristics of this body of people. The chief characteristics which, may be recognized here are the large proportion of underground workers, the small number of young persons, and the absence of female workers, except occasional office help. Another point of interest is the background of the labor supply. The fundamental operation of coal mining is the extraction of coal from earth and its bringing to the surface. Hence the majority of persons employed a r e underground workers. The special charact e r of underground work, accompanied by darkness and danger, has always singled out the "miners* as a group for whom social legislation should be provided. In a mine like F\ishun, where opencut operations exist, surface workers naturally dominate, but this is an exception and the majority of miners the world over work underground. Aside from some larger mines, statistics on the percentage of workers underground in China are r a r e . Nevertheless, on the basis of a few examples, some inferences can be made. A large mine like Kailan employs between 60 and 70% of its men underground.

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Of those underground nearly 70% are contract workers; but on the surface only 45% are contract workers. In a smaller mine like Chunghsing, the percentage of underground workers is close to 60%; while in a medium size semi-modern mine like Liuhokou, the percentage is even less than 60%. It would appear that the more efficient the mine i s , the higher the percentage of workers underground. One explanation for this is that the modern mines can eliminate much surface labor in the transportation of coal. The argument that the efficiency of mines is related to the percentage of men underground can be supported by considering conditions in other countries. For instance, in the United States, about 83% work underground; in Germany, only 78%; and in France, 68% (70).* The average in China is slightly less than 60%. From 70 to 80% of workers in "modern" coal mines are between twenty and forty years old, which indicates that child labor is not important. Actually, Chinese laws prohibit persons under 16 to be employed in the mines. However, there are exceptions. For instance, in the Japanese controlled Shantung collieries, nearly 10% of the workers were under 16 in 1930 (71); and the Chungfu Company, Honan, also employed about 800 workers between 14 and 17 years of age in 1932 (72). On the other hand, child workers are more common in native mines. As for female workers, economic and social traditions prevent them from working in coal mines. The labor supply was inadequate in Manchuria and two-thirds of the coal miners had to be recruited from Shantung and Hopei provinces. This labor force was also unstable because most of the migrants were single men seeking employment partly for accumulating enough money to marry a home town girl. In the coal-producing areas of China Proper, however, the local labor supply is generally adequate. Furthermore, these miners are more steady workers, because they have their families and homes nearby. The relative availability and stability of coal labor in China Proper is reflected by conditions existing at the Chunghsing Company. According to a survey made in 1931, 97% of the "contract" laborers were natives of Shantung province, and 89% had been born at Yihsien, near the mine (61, p. 239). The supply of skilled labor is a different story, since machinists and electricians usually have to be recruited from industrial centers like Tientsin, Tangshan, or Shanghai. • T h e s e f i g u r e s Are f o r 1 9 3 5 . The U n i t e d S t a t e s d a t a i n c l u d e s o p e n - c u t I t s h o u l d be remembered, h o v e r e r , t h a t s t r i p p i n g o p e r a t i o n s have become i m p o r t a n t in America d u r i n g the l a s t d e c a d e .

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WELFARE

It is well known that Shansi province is one of the richest districts for coal in the world, but few people know that as late as 1933 some coal miners there were treated worse than slaves. The following account is taken from "Takungpao" of December 31,1933 (67, p. 260) and the story is recorded in the annals of the Chinese Labor Movement. In a certain unnamed mine, from 80 to 90% of the workers were either tricked or seduced by the contractors to join the mines. These men came from various channels of life, but were chiefly the unemployed coolies from other provinces, the peddlars who were passing by, or thieves sind fugitives from justice. Once in, they were literally called "dead laborers," because the supervisors and police saw to it that they never left the area in "one piece." In the mines they were whipped like mules by the contractors for slackening or even slowing down due to illness. Besides the regular work, the miners usually had to carry an extra bag of coal per day for the contractor. Under these primitive working conditions, naturally many men were killed. Those merely crippled were chased out of the area; while those caught attempting to escape or inciting revolt were severely beaten or sealed in some old "chamber" to die. After sleeping in dungeons, eating flour cakes, and working in "hell," the men simply lived from day to day only to smoke, drink and gamble their money and lives away. Even in modern mines, police forces are commonly employed for maintaining order and to cope with possible banditry. But to turn this power against the men is imperialistic and undemocratic. There have been several cases where strikes, and subsequent police suppression, have resulted from petition for higher subsistence wages. Mining companies also have abused labor sometimes by delaying wage payment six months at a time, then dismissing the men in slack seasons. No wonder the average Chinese miner often believes that mining companies and contractors think more of low cost output than of human welfare. The life of an Américain coal miner is not necessarily unpleasant, so why should it sometimes be unbearable in China? Working Hours, Holidays ajid Rest Days. The new Mines Act passed on the 25th of June, 1936 (73) and providing that hours of work for underground workers shall be eight in a day, has not yet come into force. Coal mines are therefore still governed by the Factory Act of December 30, 1929, in accordance with the inter-

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pretative note of the former Ministry of Industry, dated October 16, 1931 (74). This act provides in section eight that normal hours of work for adults shall be eight in a day and that in case of need, these hours may be exceeded, though not by more than two hours. The reduction in working hours in several large mines in China Proper came about prior to the time when the Factory Act and Mines Act became law. This resulted from the efforts of organized labor under the supervision of the National Government. In Manchuria, the 8-hour day naturally could not be enforced. In China Proper, reduced hours were accompanied by reduced wages, hence, the lot of coal labor was not improved. In fact, many workers applied to work double shifts. Nevertheless, this is a step in the right direction. The next step concerning the rise of hourly wages can only come with highe _· efficiency of workers, better transportation facilities, larger coal markets, and perhaps reduction of management profit in some cases. In the Kailan Mines, three 8-hour shifts are strictly observed underground, but travelling time is excluded; on the surface, company workers usually put in from 9 to 10 hours. All workers are on a seven-day week. In Chinghsing, the 8-hour day is also observed for underground work; and the workers have one day of rest every two weeks. In Liuhokou, most workers are on ninehour shifts, but this may include travelling time. In the YangchuanPaochin Mine of Shansi, miners get one rest day per two weeks with pay. In native mines, the working hours are not set, but a man generally has to work 12 hours or more in order to earn a reasonable income of, say, 80 cents a day. The Factory Act stipulates an 8-hour day, a rest period after 5 hours work, one rest day in seven, at least six statutory holidays, and an annual vacation of from ten to thirty days with pay. This schedule has not been uniformly enforced in coal mines, but legal holidays with pay are observed. Men retained for work during holidays receive extra payments.* In the Kailan Mines, the wages are trebled on the holidays at the lunar New Year. Wages and Earnings. Wages in the Chinese coal industry vary with the geographical location of the collieries, reflecting essentially the supply and demand for coal labor. Thus the mines in Manchuria pay higher wages than those of China Proper. Similarly, wages in north Manchuria will nearly double those in south Manchuria for the same type of work. The average daily wage for all •The C o l l e c t i v e A g r e e m e n t s A c t of O c t o b e r 2 8 , 1 9 3 0 , w h i c h came i n t o N m i b e r 1, 1932, p r o v i d e e t h e above s t i p u l a t i o n .

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colliery workers in China Proper was estimated at CNC $ .47 (65, p. 104) as compared with CNC $.61 for Manchuria in 1934. Wages also seem to vary with the extent of industrial development and availability of transportation facilities around the coal mines. In Shansi, for instance, the average per capita daily wage came to between 24 and 47 cents; in Shantung, 45 to 51 cents; while in Hopei they were 53 to 59 cents during 1934 (65, pp. 102-104). Wages naturally vary with the type of work done. Contrary to popular belief that modern mining labor is generally unskilled, there are a hundred and one different jobs which require experience and training. However, in China, the use of unskilled labor in place of machinery is widespread.* Hence, the bulk of the miners are paid at a rate no higher than that of the common "coolie." On the other hand, a small number of skilled technicians, such as machinists, electricians, and foundry workers are needed. These men, directly under the employ of the company, usually receive wages much higher than those of the contract miner. This situation presents a sharp contrast to the mechanized U. S. mines, where, on the average, the contract miners who actually produce the coal earn even more than the other skilled workers. To gain a general idea of the wages of Chinese coal miners, let us examine the Kailan wage scale, which is admittedly higher than the average. Due to the efforts of both labor and management to restrict the power of the contractors in this concern, the contract workers are not abused as much as in other mines. But they still do not earn what they seem entitled to. The following table shows a few grades of workmen, ranging from unskilled to skilled. The average unskilled company laborer earns about 55 cents per manday; the contract miner averages about 60 cents, and the skilled worker about one dollar. It is significant to note that the low-paid groups are either those who do work that is like native work, such as the stone cutters or masons; or those who can be taught to run certain machines without difficulty, such as the pumpmen and the hoist operators. On the other hand, the high-paid group includes the much needed and technically trained mechanics and electricians. The contract workers in average coal mines are paid less than the company men, thus bringing the whole wage level down. It has been estimated that should the Chinese contract system be abolished and the men paid on the basis of what they produce, the average coal miner's wages could be raised at least 20% (63, p. 122). •The l a b o r which t a k e s the p l a c e o f machinery must nevertheless • l i n i n g s k i l l and e x p e r i e n c e .

have g e n e r a l

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Approximate Wages of Kailan Workers in 1932 (68, pp. 104^7) Categories of Labor

A.

Average Daily Wage Yuan Directly employed company workers Unskilled surface laborer Ordinary underground laborer Watchmen and gate-keepers Mule and horse drivers Power house firemen Masons and stone cutters Pumpmen and hoist-operators Carpenters* Skilled mechanics* Electricians* Foundrymen* Foremen*

B.

0.46-0.50 0.48-0.53 0.48 0.58 0.53-0.58 0.58-0.63 0.58 0.58-0.83 0.75-1.20 0.75-1.20 0.75-1.20 0.75-1.50

Contract workers paid by contractors Surface Underground

0.45-0.55 0.50-0.75

•Entitled to lower cost coal. All workers are entitled to some bonus - - about 15 yuan per year. Efforts towards this end, in the form of direct pay to the workers, or at least at an agreed rate of minimum pay by the contractor to the workmen-commensurate to his efforts has recently been made. Otherwise, unless the productivity can be raised, all other conditions being the same, there can be no substantial wage increase under existing Chinese conditions. It has been argued, however, that by virtue of shortening hours and raising wages, the coal miners would voluntarily work harder and more efficiently so as to increase their productivity to the extent that management would not suffer in paying higher wages. At first glance, the average wages of the coal industry especially in China Proper, do not compare favorably with other industries in the country. The following table seems to substantiate the above statement. But upon closer examination of the real income, which

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is about 10 cents per man-day in excess of the actual wages*, the situation is not as bad as first thought, considering the fact that most laborers are unskilled. One authority asserts that in 1931, Chinese coal miners' earnings were on the average between 50 and 90 cents per man-day (59, p. 35). In terms of U. S. currency, 65 cents would be equivalent to about 20 U. S. cents. To an American, this would be unbelievably low; but to a Chinese who spends about 20 Chinese cents or 7 U. S. cents per man-day for food, this income still means a minimum subsistence. The Chinese coal lab o r e r ' s earnings seem just about sufficient to keep him and a small family alive, provided that he is employed all year round. Average Daily Wage Rates of Workers in Various Manufacturing Industries in Shanghai and of Coal Workers in 1934 (6l"p. 254) Shipbuilding Printing Silk Weaving Machinery Underwear Knitting Coal Mining in Manchuria Oil Pressing Tobacco Wool Weaving Enamelling Paper Making C otton Weaving Flour Coal Mining in China Proper Cotton Spinning Silk Reeling Match Making

Yuan

1.256 1.036 1.026 0.850 0.704 0.610 0.609 0.607 0.566 0.557 0,555 0.535 0.525 0.468 0.450 0.408 0.386

*The c o a l i n d u s t r y i s p e c u l i a r i n t h a t , i n a d d i t i o n t o t h e money w a g e s , p a y · m e n t s a r e f r e q u e n t l y made i n t h e f o r m of c h e a p o r f r e e c o a l , low o r e v e n f r e e room and b o a r a , and s o m e t i m e s h o l i d a y p a y m e n t s . B e s i d e s , f o o d c o s t s i n m i n i n g a r e a s a r e u s u a l l y l o w e r t h a n i n i n d u s t r i a l a r e a s . T h e r e a l s o e x i s t s t h e common b o n u s s y s t e m a s i n a l l i n d u s t r i e s . As a r u l e , t h e d i r e c t l y e m p l o y e d w o r k e r s r é · c e i v e more s u c h b e n e f i t s t h a n c o n t r a c t men.

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SOCIAL INSURANCE AND SAFETY PRACTICE

In China, social insurance legislation has been generally lacking, and seldom put into practice. Though compulsory insurance for life, sickness, disability, old age and unemployment are especially important for the welfare of coal labor, it is absent because neither the management nor labor believes in the theory that such insurance "pays.* Workmen's compensation for accidents and death, however, are commonly provided by the more modern mines, and the amount has gradually increased. The most progressive mine in provision of workmen's compensation for injury or death is the KaÜan administration, where organzed labor has been strong in "striking" for reforms. Chunghsing is another where organized labor has been successful in negotiating for certain compensations. Even in small mines, the practice of contributing to a bereaved family is common. The following tables shown the compensation afforded workmen at Kalian and Chunghsing mines. Kalian's Compensations & Benefits for Accidents, 1552,(65, p. 87J (Injury or death must be from working on mine premises) 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

Wages are not paid to the sick. No compensations for death from internal sickness. The injured are entitled to wages until recovery. The disabled should be given work if possible. Two hundred yuan for families of those killed or dead through injury. Two hundred yuan to those whose four limbs are injured beyond recovery. One hundred yuan for those blinded in both eyes.(Arts. 13 and 14) One hundred yuan for those losing one leg. Two hundred yuan for workers losing one eye, but who can still work. Fifty dollars for those losing one hand. Two dollars given for each segment of bone in fingers broken. Twenty to forty yuan given to the injured who cannot work but who can still walk around. The totally disabled and their families can move to a company institution for the poor, where food, lodging, and education (or training) for the young are provided. The old can live there

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the rest of their lives, while the young are given one to two yuan a month until they are 16. 14. Any family of the dead or totally disabled can enter the above institution, but regulations are strict and freedom restricted there. Accidents, Sickness, and Old Age Pensions at Chunghslng Co., Shantung, 1932, (69, pp. 38-40) 1. Deaths as result of work a. Direct company laborers' family receive 50 yuan for burial, and one to two years' wages depending upon the length of service below or above seven years. b. Contract workers' families get 50 yuan for burial plus 150 yuan for compensation. 2. Injury as a result of work. Both company and contract men are given medical aid, food, and wages until recovery. If permanently disabled, company men receive from one to three years' wages depending on whether length of service is under five years, between five and ten years, or over ten years. The contract men are usually given 150 yuan only. 3. Sickness and death not as a result of work. a. Company men are provided with hospitalization and receive half pay until recovery. Those not likely to recover in the immediate future are dismissed with 1-6 months' pay, depending upon the years of.service. If they die, 50 yuan burial fee given and up to one year's wages given to workman's family. b. Contract workers receive hospitalization during sickness but get no wages from the contractor. No compensation for death in such a case. 4. Care for old age. Company workers who have worked continuously for a period of over ten years, and are above sixty are allowed to retire with half pay. Those who want to be paid once and for all are given full eighteen months' wages. The contract men are not entitled to the above privileges. Even large mines have not instituted contributory social insurance programs in China. One reason for this is the low wages paid to the workers; and another is the cheapness of life itself. As China becomes more industrialized, both wages and cost of

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"lives" will be higher. Hence social insurance must eventually become a reality. Ήιε worker will sooner or later be convinced that by setting aside, for instance, a yuan a month, his family can be assured of a substantial amount of money if he should be killed or totally disabled. On the other hand, the management in subsidizing the miners' insurance need pay no more than they have been doing in compensating for numerous deaths and injuries. Management can perhaps save money through definite programs of promoting safety. Promotion of safety from both the financial and the humanitarian points of view, seems wholly advantageous. The Chinese coal industry should take the lead in encouraging accident prevention because coal mining is a dangerous occupation. Mine inspection by the government is also essential. Companies which hire sufficient numbers of safety engineers to examine the causes of accidents, thus minimizing casualties, can save money by paying fewer injury or death compensations; and at the same time save invisible expense from the workers lost-time factor. The workers on the other hand need not miss work so often, nor work in mines which are unsafe. A few simple things like employing "fire bosses" to test for gas and "loose hanging" would produce great benefit. Safety glasses and shoes to reduce accidents are economical in the U. S. and may eventually prove so in China. Rewards for a period of work without injuries, and a general program of safety education would repay both labor and management. The importance of accident prevention will become greater as mechanization increases. An intelligently conducted safety program in connection with mechanization could reduce casualties below hand labor mining in the coal industry. The U. S. Bureau of Mines in connection with its study of mine hazards, has published a great deal on safety practices; the Chinese Department of Mining, now under the Ministry of Economic Affairs, should also carefully look into this matter. EFFICIENCY

OF COAL MINING

LABOR

The Question of Skilled Labor (See Chapter V). There is nothing wrong with the intrinsic quality of Chinese labor which prevents them from becoming efficient skilled workers, except perhaps for the undeniably lower physical efficiency caused by smaller build and generations of undernourishment. But due to a combination of factors now existing in the coal industry, such as the low degree of mechanization, the existence of an over-supply of cheap labor,

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the old-fashioned manner of mine administration, the abuses of the contract system, and the general political instability, the development of a skilled labor supply has been slow and inadequate. It is estimated that the percentage of skilled workers in Chinese coal industry is only about 1 to 2%. Mine operators in China generally feel that by utilizing cheap labor in place of machinery, the resulting production costs are not any higher for a unit output of coal. Hence, skilled labor is sparingly used, even in the more modern mines. In primitive mines, the owners would not know what to do with the "expensive" skilled worker. The contract system ruinously affects industrial training of miners because the management's technical supervision does not extend directly to the contract men. Unskilled labor has always been the main item of production cost in China* and with the ever increasing demand by organized labor for better wages not accompanied by higher efficiency, the time will come when the factor of low wages will be out-balanced by low productivity. As the coal mines gradually approach the stage where the productivity of labor cannot be increased without employing labor-saving mechanical devices, the operators begin to think the need of skilled workers. Hence, in order to make mining profitable, partial mechanization and training of workers to run the machines is necessary. There is nothing to fear from depriving unskilled laborers of their jobs, because the coal industry must expand in proportion to the growth of other industries in future China. It is a matter of transforming unskilled workers to skilled ones in an expanding labor, market. Output Per Man-day. The efficiency of Chinese coal miners, whether in terms of output per man-day or output per man-hour, is considerably lower than that of American or Western labor. Because of the irregularity of working hours in China, it is more convenient to speak of efficiency in terms of output per man-day. Even in the two best-equipped mines, namely Fushun and Kailan, Chinese coal labor is less than one-tenth as efficient as American miners; and less than one-third as efficient as average European miners. But compared with Japan, the disparity is not so great; and compared with Indo-China or India, the individual efficiency is even *Labor c o s t s of c o a l mining in Chins amount t o between two and t h r e e yuan per t o n , o f t e n c o n s t i t u t i n g 60% of the t o t a l . As i n A m e r i c a , i t i s the main i t e m of p r o d u c t i o n c ò s t a , but u n l i k e A m e r i c a , i t i s o n l y h i g h because of the e x c e s s i v e q u a n t i t y of man-hours used.

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higher. However, it must be remembered that the average efficiency of semi-modern mines is somewhat less; and that of the numerous "native" mines far below the modern mines. True, low output per man-day does not permit higher wages for the workers, but it can also be said that low wages keep the productivity down. Unless higher wages in the future call for mechanization, the efficiency of Chinese miners, even with some improvement of mining methods, will not be much higher than the present level. In analyzing the output per man-day of the Chinese coal industry, it is necessary to bear in mind that only the figures on the largest coal mines are reliable. Those of the medium mines tend to be exaggerated because the number of men employed generally exceeds what has been reported. Data on native mines are only from sample studies. The following table is made up chiefly from information gathered by the Geological Survey of China (65), but has been supplemented from sources (60) (68) (63) which the author considers more authentic and up-to-date. Although the table is not complete, it does show the general productive capacity of the Chinese coal miner. Output Per Man-day in Typical Chinese Coal Mines in pre-1937 years' (in metric tons) Mines

Coal Cutters All Workers

1. Annual output of 1.5 million tons or more 1.90 Fushun (open-cut), Liaoning 0.76 Kailan, Hopei 0.55 Chunghsing, Shantung

0.70 0.43 0.40

2. Annual output 0.5 - 1.5 million tons Chungfu, Honan Huainan, Anhui Chinghsing, Hopei Liuhokou, Honan Luta, Shantung

0.55 0.45 0.68 0.56 0.45

0.30 0.35 0.42 0.40 0.30

3. Annual output 0.2 - 0.5 million tons Chungying, Hopei Chinpei, Shansi Changhsing, Chekiang Peipiao, Jehol

0.48 0.37 0.31 0.45

0.39 0.25 0.20 0.31

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Mines 4. Annual output 0.1 - 0.2 million tons Liukiang, Hope! Fuhua, Hupei 5. Native Mines Best Average

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Coal Cutters All Workers 0.55 0.30

0.34 0.23 0.12 0.06

The conclusion gathered from the above table is that the output per man-day in the largest coal mines averages about half a ton; that of medium sized mines, which employ some modern machinery, slightly less than 0.40 tons; that of less efficient mediumsized mines and smaller mines, which rely substantially on manpower for underground work, seldom more than 0.30 tons; and that of native mines, generally below 0.10 ton. Compared to 5.25 tons per man-day in U. S. bituminous coal mines during 1943, the average pre-war Chinese figure of 0.30 ton is indeed low. Possibility of Increasing Productivity. It is believed that the productivity of coal labor in China can be substantially increased. Some general tendencies influence efficiency in all industries, while other apply to the Chinese coal industry in particular. Both types of factors point the way to higher efficiency in China. (1) The normal development of post-war China calls for a larger volume of consumer goods, which in turn calls for more coal power. (2) Over a long period of years in industrialized countries efficiency has risen and must continue to rise. China is little industrialized at the moment, but industrialization accompanying, agrarian reform is inevitable. (3) The general rise of efficiency in all industries will be aided by improvement in the key ones. In China, the probable development of improved transportation, for instance, will increase the productivity of all industries. (4) During periods of social and political unrest, efficiency very seldom increases. China has known little peace since the establishment of the republic, and the majority of industrial firms have been forced to suspend operations from time to time. Hence, when enduring peace finally comes to China, the more skilled Chinese laborer will be in a position to produce goods at greater efficiency. The productivity of Chinese coal labor could also be increased by the reforms which have been suggested. The obsolete Chinese contract system should be abandoned and a wage system providing incentives to work harder for rightfully higher pay should be sub-

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stituted. Working and living conditions should be improved, along with higher wages, so that the men will be capable of working more efficiently. Better administration could reduce excess man power used around the mines. Better engineering development of the mines is needed to permit coal to be produced, even with hand labor, by the minimum effort. The development of a more permanent labor supply would reduce costs by minimizing absenteeism. Finally but not least is the injection of fresh energy into an antiquated handlabor coal industry by the application of as much machinery as practical. Chinese coal operators in the next ten or fifteen years should, by such improvements, be able to raise the productivity considerably. The increase of efficiency must, however, exceed the expected rise in wages so that production costs can be reduced. If this is achieved, China can not only bring cheaper and larger volumes of coal to domestic markets, but can attain a better competitive position in the international coal trade. It is equally important that the rise in efficiency be great enough to assure higher real wages; for otherwise, with rising living costs, coal workers would not be benefited in any way. In spite of the low-priced labor available in China, it is believed that the productivity of coal mining can ät least approach Japanese standards. ORGANIZED

LABOR

IN THE C O A L

INDUSTRY

Economic and Social Framework. Despite its present undeveloped state Chinese labor has long recognized the importance of professional unity. Craft and regional guilds, commonly known as "hongs" and "pongs," have long existed. But these guilds, as in Europe, were intended primarily to promote the craft rather than to s e r v e the interests of the workers. With the disintegration of the old Chinese society, following the revolution, they no longer protected the trade, the employers nor the workers. Where labor was strong, the reorganized guilds became unions; where labor was weak, the unions retained certain old features and became a kind of company union. The direct influence of guilds on unionism in the Chinese coal industry is limited, but the indirect impetus given to coal unionism by organized labor of other industries, which grew out of ancient guilds, is noteworthy. Perhaps, it is appropriate to say that coal unionism is wholly modern, and represents a labor movement growing out of the needs of the workers. Aside from various adverse political reasons, there are general causes which have tended to retard and hinder the normal organi-

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zation of coal miner's unions. Large as is the total number of Chinese coal mines, the majority are only small native mines employing from 40 to 70 persons each. These little mines are scattered throughout the extent of a very large country. The modern and semi-modern mines, though employing more men, have recurrently felt the instability of labor as a result of internal and external strife. Foreign imperialism in the face of ineffective government protection was another factor. The contract system has been detrimental because it prevents direct contact between labor and management, hence makes effective labor organization difficult. The average Chinese coal worker, illiterate and inarticulate, industrious, but lacking initiative, has as yet developed hardly any sense of group solidarity. His background is that of an agricultural society in which the family system paradoxically has repressed both individualistic feeling and group spirit. At the Chunghsing Mine in 1929, two years after the formation of the union, only 40% of workers desired to join it. This attitude of indifference to trade unionism has not radically changed in recent years. Coal Unionism and the Chinese Labor Movement. The movement for organized labor and the employment of collective bargaining as a means for promoting the interest of the workers are only a recent phenomenon in the coal mining industry in China. At the Kailan mines, the unions were not formed until 1922 — the year of the well-known Hongkong Seaman's Union strike against unequal payments between Chinese and foreign seamen. After the "Wu PeiFu Massacre" of railway workers in 1923, labor in the north went underground; while in the south, Sun Yat-Sen's Canton Government promulgated Trade Union Regulations giving legal protection to organized labor in 1924. The "May 30 Incident of 1925" was a signal for a new tide of revolutionary and labor activities. Repercussions began to be felt in the coal industry, when rudimentary labor unions were established in a number of collieries, and previously formed workers' organizations began to assert themselves more effectively. Labor unions were organized at the Chunghsing mines of Shantung in 1927; Chinghsing mines in Hopei and Liuhokou Mines in Honan in 1928; Lincheng and Liukiang mines in Hopei, the Chiawang mines in Kiangsu, and the Japanese controlled mines in Shantung in 1929. In March of the same year, unions at the five Kailan mines created a joint organization. In 1930 and 1931, labor unions were established at the Pinghsiang mines in Kiangsi; the Yili and Chungho (later becoming part of Chungfu) mines in Honan; the Tsuchuan-Poshan and Weihsien districts in Shantung; and the Po-Ai district in Honan (75) (61, pp. 264-6).

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No complete record is available to show the extent of unionization in coal mines of either China Proper or Manchuria during the pre1937 years. The situation in Manchuria can be summarized by saying that Japanese suppression of labor activities reduced unionization to obscurity. A rough estimate on the percentage of "organizable" labor unionized in modern and semi-modern collieries in China Proper would be about 40% at its height.* For all of the larger mines in China (including Manchuria) the figure would be less than 20%; and if native mines were included, it would be no more than 10%. Compared with American standards of 80% maximum, this is conspicuously low. Most of the so-called unions should be characterized as the company or the company-dominated vari-. ety.# Partial solidarity exists onlyin local form and a national federation of coal mines union has not yet been formed. It must be mentioned at this point that many of the coal unions formed during the tide of labor activities after 1925 have since been reorganized under the Kuomintang party. Factor of Government Policy. Labor unions and collective bargaining in China, though at times helped by the Communist Party, did not owe their existence to it (76), as many people are inclined to think. But following the rupture between right and left wings of the Kuomintang, and the domination of the rightists headed by Chiang Kai-Shek, the official attitude toward unions underwent swift and violent change. The Nationalist Government undertook the strict regulation of labor unions, in order to prèvent their use as centers of Communist opposition. It also used its powers of regulation to suppress the activities of unions and thus deter them from promoting the interests of labor (74B, pp. 259-60). Coal unionism for a while suffered the same fate, but because of its relative weakness, in a much milder form. Kuomintang organizers, when assured of the absence of reactionaries, actively participated in reviving the unions. On the whole, the policy pursued by the Government toward coal industry unions has been moderate. Legislation to promote cooperation between labor and management, and to protect the legitimate interests of labor, was enacted in the Factory Act of 1929, the Collective Agreements Act of 1932, and in the Mine Act of 1936. This was good but could seldom be enforced. The majority of strikes and disputes in the coal industry, as well as other industries, were settled through mediation by pro* Baaed c h i e f l y

on t h e C h i n a L a b o r Y e a r b o o k

(75)

^ C o m p a n i e s u s u a l l y c o n t r i b u t e from 60 t o 5 0 0 d o l l a r s Duea a r e a e l d o m p a i d by u o i b e r a .

monthly

to various

unioaa.

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vincial governments and local Kuomintang agencies in recent prewar years. In a number of the larger collieries, labor unions have succeeded in establishing collective bargaining as a means for promoting the interests of the coal miners. During the war, government policy regarding labor has naturally been unified and strengthened. Under Article XIV of the National General Mobilization Act of May 1942, the Government may issue ordinances to prevent or settle labor difficulties. It may prohibit all strikes or any action hampering production (77). This placed all workers in the "special unions" status of railway and postal workers where strikes were prohibited. Late in 1942 a draft of a labor policy for the Government was adopted for future promulgation, possibly after the war. Under its terms, the right to organize unions would be expressly forbidden to "workers in military industries;" the right of collective b a r gaining or striking forbidden in "public enterprises;" and the right to strike forbidden in public utilities and communications companies, but the right to bargain collectively is permitted to them (77). It is logical that all heavy industries are classed as military, while the railroads and communications networks are already completely nationalized. Even those industries which are not directly government-controlled are under the supervision of the Ministry of Social Welfare. The interpretation of the terms of this legislation will control the development of unionism in the Chinese coal industry. Coal labor, as well as labor in general, is likely to seek release f r o m government control, if working conditions, wages, and living standards are not sufficiently improved to meet the progressive demands of an educated, progressive, and democratic China.

CHAPTER

THE PROBLEM OF COAL

Vili

TRANSPORTATION

In China, since the markets will not come to the coal fields, coal must go to the markets. Hence transportation is a vital factor in the development of the coal industry. The concentration of coal production in the relatively l o w - r e s e r v e coastal provinces from Anhui north to Manchuria is attributed not only to the markets, but to the available transportation facilities. However, in discussing transportation, it is important f i r s t to consider the general aspects of markets. The main bulk of the population in China is in the fertile coastal plains, the barren inland mountains and deserts are relatively uninhabited. These population concentrations, or consuming centers, a r e furthermore amplified in the great r i v e r deltas, as illustrated by Shanghai, Tientsin and Canton. Other concentrations around c i t i e s such as Shenyang, Dairen, Peiping, Tsingtao, Hankow, Changsha, Nanking, and Ningpo, owe their importance to rail and portfacilities, plus the political and cultural background. The inland c i t i e s of Chungking Chengtu, Kweiyang and Kunming increased in importance as a result of wartime immigration of capital, industry and population. Future industrial and domestic demands of coal must continue to come chiefly from these consuming c e n t e r s . Rural demands will never be heavy until a network of transportation facilities eventually extends to these a r e a s . FACTORS

IP> T R A N S P O R T A T I O N

COSTS

A s coal is a bulky commodity of low value per unit volume, transportation costs play a very important part in determining the competitive advantages and disadvantages of different coal deposits.

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Freight charges to large markets typically exceed the f.o.b. mine value of coal. For instance, Shansi anthracite mined at 3-4 yuan sold for 12-15 yuan at Shanghai; and Kailan bituminous coal mined at 3-4 yuan sold for 7-8 yuan at Tientsin and 12-15 yuan at Shanghai in pre-war years. At least three factors play a part in determining transportation costs: (1) the distance between the mine and consuming center; (2) the means of transportation, whether by railway, steamship, canal barge, trucks, animals, human, or any combination of these; and (3) freight rate structure governing the transportation systems in the East. Length of Haul between Mine and Consuming Center. Most of the large coal deposits of China are fairly close to markets in the north, and there are smaller reserves in the central and southern parts for supplying markets in those areas. If adequate transportation facilities were available, the lengths of haul would not create abnormally high transportation costs. The accompanying flow map shows the relative distances from mines to consuming centers. Even the great deposits of Shansi basin should have access to coastal markets at one Chinese cent per ton-kilometer railway freight for 600 kilometers. Other coals which only have to move 100 to 200 kilometers should, if properly mined and transported, have a corresponding competitive advantage. Assuming that steamship rates in China will eventually be lower than railway rates for long hauls, a condition existing in the West, then the competitive range of ocean transport can exceed rail transport. This will enable greater volumes of northern coals to reach central China markets 1000-1500 kilometers away. The important question is what transportation facilities China already has, and will be able to provide in the future. Transportation Facilities. The persistence of primitive conditions in China's transport system has aifected every aspect of her life. But transport in China is not completely primitive. Elements of modernity have been introduced: railroads, steamships, and automotive traffic, though they form only a small minority of the total. The bulk of transport, especially for short hauls, is still carried by men and animals. Modern transportation is destined to play an increasing role in moving goods in the future, hence it is necessary to enumerate the facilities now available in China. From 1866 to 1942 China built no more than 12,036 miles of railroads on an average of 160 miles a year, 27 miles to each million

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Of her population, or 274 miles to every 100,000 square miles of territory (78). Against China's 27 miles of railroad to each million population, the United States has 1,940 miles, Britain has 440 miles, Germany has 550 miles, and Japan has 190 miles. As compared with China's 274 miles to every 100,000 square miles of territory, the United States has 7,970 miles, Britain 21,360 miles, Germany 20,150 miles, and Japan 9,120. Of China's 12,036 miles of railroads, 3,726 miles were lost through the Japanese invasion of Manchuria in 1931. Since that time, Japan has more than doubled the Manchurian mileage (79) to make a total closer to 17,000 miles for all China. Beginning in 1937, China abandoned an additional 7,000 miles to the Japanese, retaining very little even for carrying on the war. This partly explains why China had so little ability to launch counter attacks. In China proper, the Peiping-Tientsin area has five radial lines, but no other city in the south has more than two railways. Nine western and outer provinces are entirely without railway service, while several others in the south have only a single line. Wherever lines have been built, they have carried a capacity business from the start, especially in passenger traffic. Most lines are built on the American standard gauge of 4 feet 8-1/2 inches. Inland water transport has been of great importance to China in the past, with an estimated 40,000 miles of canal system, (80) mostly in the Yangtze Valley and coastal areas, which provide channels for shallow-draft boats. The Yangtze River itself is the country's chief avenue of inland transport, and is especially significant in view of the lack of east-west railways in central China. It is navigable most of the year by 10,000-ton ocean freighters as far upstream as Hankow.* The channel is thirty feet deep as far as Ichang, about 1,000 miles by river from Shanghai. The upper Yangtze and its tributaries only permit shallow-draft steamers or native craft. The latter are propelled by wind or current, or pulled upstream by trackers on the river bank. The Yellow River and West River are quite unimportant compared to the Yangtze, being only navigable by small craft, but they also have accessory tributaries and canals. The famous Grand Canal roughly parallels the north China sea coast for nearly 800 miles; however, like'other water-ways in China, its practical importance is limited by its shallow depth. *Betveen January and A p r i l , the Yangtze R i v e r boats because of the sandbars near Kiukiang.

ia only n a v i g a b l e by s e d i u a - a i t e d

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The lack of railroads in western China has thrown fresh emphasis on water transport during the war, and the largest part of all freight in that area is carried by small boats and steams over an extensive network of rivers. Szechuan province is particularly well endowed with water tributary to the Yangtze. The small steamers and launches plying the rivers of Free China amount to only 25,000 tons, but junks and other native craft aggregate over half a million tons (80, p. 106). In view of the 3,000 miles of Chinese coastline, (81), ocean shipping of freight should be more important than it is. Hitherto, the volume of goods transported has been greatly restricted by the scarcity of modern Chinese steam-driven vessels, which amounted to little more than half a million tons before the war (82). In fact China possessed in 1936 less than 200 ships of 1,000 tons or over, which reveals little progress since 1875. Fortunately, foreign ships, chiefly British and Japanese (approximately the tonnage of Chinese ships), also sailed in China's coastal waters and inland rivers. In 1930, coastal and river steamers owned by nationals of these two countries carried 67% of all cargo by value, and 61% of all passengers by value of tickets (83). China's shipping has also been handicapped by the lack of sufficient harbor facilities. With the exception of Shanghai and Dairen, few ports have dry-docks. Natural facilities at Tientsin are unfavorable because of the narrowness and tortuousness of the Peiho, which frequently becomes filled with mud. Canton also has the disadvantage of shallow channel depth; but Tsingtao is a good natural port. Other smaller trading ports such as Swatao, Amoy, and Hangchow, though possessing limited harbor facilities, have delta and estuary service for small steamships. Twenty years ago there were only about 1,000 miles of surfaced motor roads in China, with an additional 10,000 miles of graded dirt roads (84). By July, 1937, the totals in China Proper alone had increased to approximately 15,500 and 52,500 miles respectively (82, p. 243) (85). Further progress has been made in that area since the war started, but the highway system is still totally inadequate for the full utilization of the natural resources. In contrast to China Proper, Manchuria, which is much smaller in area, now has 80,000 miles of well-leveled cobble-stoned roads (79). In 1936 there were 44,800 motor vehicles of all types in China and only 9,360 trucks (86). Of these more than one-third were in the city of Shanghai, and about one-seventh in Manchuria. The re-

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mainder, 22,000 were scattered throughout China. If even the existing roads are to be used extensively, many thousands of cars and trucks must be imported annually for some time. In view of the high price of gasoline plus the adverse road conditions, Dieselengined trucks seem to be cheaper and more suitable. Structure of Freight Charges. Railway freight charges may be employed to apportion the home market among the different mining districts, to promote export trade or to discourage imports. Preferential rates may be established between coal mining companies and railways or shipping concerns. Individual coal companies might also have.their own railways or shipping facilities. These are the important aspects of freight structure within a country. China is no exception. Since most of the coal in China is transported by railways, the railway freight structure will be discussed first; details of cost will follow. Practically all of the railways give special rates, usually in the form of discounts to coal companies, for variable haulage distances, or between particular points. The rates also vary with the quantity shipped. There are two kinds of special rates, namely, "teh-chia," which are granted to any shipper; or "chuan-chia," which is only granted to specific collieries. The Peiping-Mukden Railway allows Kailan Company the latter special rates; The Tientsin-Pukou Railway allows Kailan and Chunghsing companies special rates; the Chengting-Taiyuan Railway has "chuan-chia" arrangements with Chinghsing, Chengfeng, and Paochin companies; and so has the Peiping-Hankow Railway with Chungfu Company. "Tapering rates," or a decrease of ton-kilometer charge as distance increases, also applies to coal in China. Unfortunately, these "tapering rates, " except in Manchuria, only exist where coal is transported from mine to destination on one railway. The development of through traffic, prior to the present war, had not been very successful, since the individual Chinese railways were not cooperative. This failure to secure "tapering rates" for over-all distances naturally constituted a burden to both producers and consumers in many localities. Take for instance, the central Shansi collieries which have to transport their coal to the Peiping-Tientsin markets via the Chengting-Taiyuan, the Peiping-Hankown and the PeipingMukden Railways at three sets of rates. Such complex rate structures partly explain why mining in the richest coal province in China has not been developed more rapidly. Steps have been taken by several railways for the improvement

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of coal transport. In January, 1936, the Tao-ching Railway, upon which the Chungfu mines depend, was incorporated as a branch of Ping-han Railway. In the spring of 1937, a new branch line was completed connecting the Chinghsing colliery more directly with Cheng-tai Railway, and a great deal of rehandling of coal was thus eliminated. In 1937 the Pei-ning Railway revised its rate schedule on through traffic for coal on the basis of distance from the point of -origin in other lines as well as its own. On railways coal is assigned to the sixth (lowest) class of goods. Rates on coal are generally based on carload lots, which are 20 metric tons for the standard-gauge lines. Preferential treatment is accorded by most railways to the larger shipper. Additional discounts are given for train loads of coal. All railways allow approximately 25% reduction from standard rates on coal shipments for export (87). Special rebates to shippers may also be given by railways for coal shipment made during the slack (summer) season. For instance, the Chengting-Taiyuan Railway generally only allows discount commencing at 40,000 metric tons hauled, in contrast with the lower limit of 20,000 metric tons for the summer months. Thus, at the rate of CNC $0,001 per metric ton-kilometer deduction from the standard CNC $0,016 for every 5,000 metric tons above 20,000 or 40,000 metric tons, the savings for the same 40,000 metric tons transported in the summer would be considerable. Many of the coal companies own sections of feeder railroads, while others have branches of the main railways extending into their properties, Kailan, Chunghsing, Lincheng Liuhokou and Chinghsing are examples of the latter. Still other mines belong to the railways; such as Fushun owned by the South Manchurian Railway Company. The freight structure of the above types are relatively simple. COMPARATIVE

MEANS OF COAL

TRANSPORT

Even in China coal transportation by human carriers is definitely out of question since the strongest man can only carry 100 pounds for about 20 kilometers a day. This means that a ton-kilometer of coal transported would cost approximately 50 Chinese cents, which is equivalent to the wage per man-day in pre-war China. On the other hand, by means of a wheelbarrow, a man can push a load two or three times as heavy as he can carry on his

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12»

back (88). Thus, in very short hauls, the cost is reduced to a competitive range with other means of transportation. However, the wheelbarrow requires moderately level and firm roads, hence its usefulness for distributing coal is generally limited to urban districts. Mules, horses, donkeys, and camels can naturally carry much heavier loads than man. A camel, for instance, can carry 500 pounds of coal. But this advantage is offset by proportionately greater food consumption. Unless rough fodder, such as grass and straw, are cheaply available, animal carriers are no less expensive than human carriers. However, in North China, camels for example are not only more economical than wheelbarrows for transporting coal from Mentoukou mines to Peiping but also compete favorably, under certain conditions, with a 20-30 mile railway line connecting the two points. Here camels can carry bags of coal from the various mines in the hills over bad roads directly to the consumer in the city. The advantage of the cart over the animal carrier is similar to that of the wheelbarrow over the human carrier. And the cart, like the wheelbarrow, must also depend upon fairly good roads. Human and animal transportation cannot compete with railways for long hauls because the carter's and the barrowman's charge is approximately ten times as high as that of the railway, while the pack mules' and the carrier coolie's charge is twenty or thirty times as high as that of the railway (88, p. 165). The reason why they can stand up against railways for local distribution is due to the excessive rehandling charges of the latter under short-haul conditions, and the fact that railroads sometimes do not exist. A western student might wonder why trucks have not been extensively used for local coal distribution. The answer is that China does not produce trucks, expensive gasoline has to be imported, and roads are generally bad. They are only at times applicable in modernized and more accessible cities, such as Shanghai, Hongkong, Tientsin and Mukden. Inland waterways, except the lower Yangtze (which medium-sized steamers could traverse), are not important for coal transport. Like human and animal carriers, barges and junks are handicapped by their slowness and irregularity. It takes five or six days to move coal over 100 kilometers. Many waterways, including the Grand Canal, have to suspend traffic for several months of a year because of freezing and shallow water. Another disadvantage of inland water

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transport lies in the police protection sometimes required for guarding the open-top boats. Due to its bulk and dirtiness, coal cannot compete with other commodities in bidding for the service of the boats. There are no "tapering rates" in such transportation. In spite of the difficulties water transport now is the only means of distributing coal to local markets in southwestern China, where many small rivers flow between parallel mountains. In fact, the Tienfu and Paoyuan mines, Szechuan province, depend upon the Kialing River to bring their coal to the Chungking area, eighty miles south of the mines. To illustrate the problems of water transportation, the case of Chungfu Joint Administration is cited. Chungfu coal was generally sold to nearby railways, and the Yangtze River ports via the PeipingHankow Railway. Only small amounts ever reached the TientsinPeiping markets by rail directly. Some, however, was transported north by rail to Taokow, then by Wei River 320 kilometers northeast to Lincheng, and finally by Grand Canal to Tientsin, Tungchow, and Peiping. In 1935, a definite plan was made to register 700 junks (totalling 52,000 tons and ranging from 30 to 200 tons each) to transport coal thus (89). The rates agreed upon from Sanliwan to various destinations along Wei River and Grand Canal were between CNC $0.0062 to CNC$0.0119 per metric ton-kilometer, which seems very low even compared with rail rates. However, it was subsequently found that Chungfu coal could be economically sold only as far north as Changchow, a distance 670 kilometers from Taokow (water transport charge per metric ton between Taokow and Changchow being 5 yuan), and cannot reach Peiping and Tientsin. Probably the slowness of the junks en route and the time it took them to arrange for return cargo added excessive interest charges to mine cost. Still it may be possible that as a result of special rates granted by the railways, the Company abandoned this water transportation project. Few coal mines in China are favored with direct railway access to the sea coast. Those which are able to reach the sea usually make their ports important. A large amount of Kailan coal goes to Chinwangtao, Fushun coal goes to Dalren, and Tzechuan and Poshan coals go to Tsingtao. Aside from the coal available for export, nearly a million tons of bunker coal are sold at these and other ports. Although the unit cost of ship transportation may be higher than railways the mines and markets may be so located as to require ship transport to connect them. Kailan, Tzuchuan and Poshan are sufficiently near the coast to permit shipment of coal to ports like Shanghai via the

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INDUSTRY

s e a . The following table on tne interport movement of coal reveals the volume transported by steamships as well as the ports of origin and destination. Interport Movement of Coal in China Proper (90) (in metric tons) Chinwangtao Nanking Tsingtao Tientsin Hankow Total Shanghai Canton Hankow Chefoo Kiukiang Nanking Swatao Total

1934 1,977,000 677,000 720,000 361,000 75,000

1935 1,940,000 802,000 816,000 357,000 226,000

3,940,000

4,263,000

2,654,000 258,000 119,000 101,000 72,000 63,000

2,919,000 319,000 167,000 82,000 68,000 58,000 60,000

3,499,000

3,842,000

70,000

As to the comparative costs of coal transport in China, it can be summarized as follows: (1) For long hauls overland, railways, with rates between 1 to 1 - 1 / 2 Chinese cents per metric ton-kilometer, are the cheapest, when available. (2) Steamship rates, though ordinarily 2 to 7 times as high as railway rates, could be radically r e duced when more steamships are available: when the "return c a r go" is carefully planned; and when the hazards of piracy on the open sea and large r i v e r s are overcome. (3) The rates of native junks and launches are at least as high as steamship rates but junks have the disadvantages of slowness and small volume per unit handled. (4) For short hauls, truck rates, even at the minimum of 25 Chinese cents per metric ton-kilometer, are still very high for coal transportation. (5) The rates for animal and human coal transport are generally between 5 and 20 Chinese cents per metric ton-kilometer, indicating a present competitive advantage over the truck in local coal distribution.

its

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Various estimates on costs have been made, notably, by W. F . Collins (91) and H. F . Bain (92). A table, based upon a Chinese set of data, is presented for comparison (86, Table 20). Two main c r i ticisms must be made: (1) The steamship rates need not be as high as suggested because Kalian coal has been shipped 800 miles from Chinwangtao to Shanghai for less than 8 yuan per ton (probably 6 yuan), which means that the maximum rate is only 1 Chinese cent per ton-mile (even cheaper than railway rates); (2) the junk rates, though variable like steamship rates, need be no more expensive than rail rates since Chungfu coal was thus shipped at less than 1 Chinese cent per metric ton-kilometer. Comparative Costs of Different Means of Transportation (86, Table 20) Rate Per Metric-Ton Kilometer (in Chinese Yuan)

Means Railways: 1st class 2nd class 3rd class 4th class 5th class Sth class

goods goods goods goods goods goods (coal)

0.03171- 0.06180 0.02650- 0.05150 0.02031- 0.03950 0.01325- 0.02570 0.01148- 0.02230 0.00935- 0.01720 0.020-0.150

Steamship and launch Native junks

0.020-0.120

Motor trucks: 1st class 2nd class 3rd class

0.560 0.400 0.240

Carts: drawn by drawn by drawn by drawn by

0.070-0.165 0.050-0.150 0.050-0.110 0.050-0.085

1 2 3 4

animal animals animals animals

Wheelbarrow: one man two men

0.110-0.140 0.100-0.125

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0.133-0.250 0.100-0.200 0.200-0.350 0.140-0.500

Donkey, Mule and Horse Camel Ricksha Porterage INTERDEPENDENCE

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RAILWAYS

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Railways without coal mines near their truck lines would have to buy rehandled coal at excessive prices from distant places. The revenue of railways would also be severely cut if coal were not transported. On the other hand, coal mines without access to railways, especially in a country of great distances like China, could not compete favorably with those which have, except where the markets are close to the mines; they might, indeed, never be operated. The railways also contribute substantially to the total coal consumption. The interdependence of railways and coal mines is so obvious that any national plan of development should coordinate the study of the problems of both industries. Importance of Coal Mines to Railways, As might be expected, those railways, along whose lines moaern collieries have been established, can secure coal at much lower costs than those passing through regions lacking coal. Lines such as Peiping-Hankow, Peiping-Mukden, Peiping-Suiyuan, Chengting-Taiyuan, and TaokowChinghua paid in 1936 only 4 to 6 yuan (US$ 1.20-1.80) per metric ton; as compared with 12 yuan (US$3.70) for the Shanghai-Nanking Railway, 15 yuan (US$4.50) for the south section of the CantonHankow Railway, and 17 yuan (US$5.30) for the Canton-Kowloon Railway (93). In 1936, the Chinese Government railroads consumed 1.3 million tons of coal at a cost of 9.3 million yuan or at an average price of 7.15 yuan (US$2.20) per metric ton (93). The coal charge was nearly one-tenth of the total operating expense of the railways for that fiscal year. To the railways, with the exception of a few lines in central China, such as the Shanghai-Nanking and Shanghai-Hangchow-Ningpo Railways, coal constitutes a major if not the most important tonnage and revenue commodity. In fact, several railways depend on coal traffic for their existence. In 1936, coal represented half of the 34.5 million tons for all commodities transported in China Proper, and was over three times the tonnage of agricultural goods transported; and the revenue was 30% of 98 million yuan for all goods transported, exceeding agricultural products (25% of the total) and corresponding to 55% of the revenue from passenger traffic (93,

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p. 83). The importance of coal traffic to railways can be substantiated by the following table. Coal Traffic of Nine Major Coal-Carrying Railways in China Proper, 1933 (87, p. 220) Railways Coal Shipments Originating in Home Line Metric Tons Ping-han Pei-ning Tsin-pu Kiao-tsi Ping-sui Lung-hai Cheng-tai Tao-ching Yueh-han

792,000 3,216,000 1,574,000 1,537,000 661,000 79,000 1,538,000 890,000 124,000

Revenue from Total Goods Percent Carriage of Revenue Total GO' Coal & Coke Revenue CNC$ 1,000 CNC$ 1,000 4,684 6,673 1,627 3,739 1,100 146 2,059 1,119 522

18,982 12,599 9,933 9,499 6,231 4,729 3,807 1,294 1,564

24.7 53.0 16.4 39.4 17.7 3.1 54.1 86.5 33.4

Importance of Railways to Coal Mines. The first railroad in Europe was built to transport coal, and among the first railroads in China was a 7-mile line constructed to deliver Tangshan coal to the river. When the Peking Syndicate started its mine g.t Chiaotso, Honan, it built a railroad to connect with a river which flows into Peiho. Because large-scale coal production generally depends upon rail transport, many coal companies in China have since either built their own branch lines, or have arranged with railways to link them with the trunk lines. The coal carried by all Chinese railroads in 1936 was 16.7 million metric tons or three-fourths of the production in China Proper during that year. In contrast, only 4 million tons were transported by sea and waterways. Though these two figures overlap each other to some degree (since the coal may have been delivered to the ports by railroads and vice versa), the predominant position of railways is clear. In fact, the pattern of industrial development in China is such that coal production approximately corresponds to the railway mileage. For instance, Manchuria, with over half of the mileage, can produce over twenty million tons annually; North China (assuming the area north of the Yangtze River), with two-

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thirds of the remainder, can produce 15 million tons annually; and the rest of China, with the remaining railroads, only has the present capacity of producing 7 to 8 million tons of coal per year. Collieries without railways pay as high as two-thirds of the total cost of their annual output in freight. In 1936, the Chinghsing Company spent over 2 million yuan for railway freight which corresponded to nearly half the value of the annual sales. During the fiscal year ending June 30, 1936, the Chungfu Colliery incurred a cost of nearly 4 million yuan as railway freight, or more than three times the colliery's total payroll charges during the same period (87, pp. 224-5). Joint Problems of Coal Mines and Railways. Among the most conspicuous problems related to development of coal mines and rail transport, is that of the unification and reduction of freight rates. This would, in the long run, increase railway revenue since lower freight charges mean a larger volume of traffic not only in coal but in other commodities as well; it will at the same time increase coal production and permit cheaper coal to reach the consumer. In short, the proposal looks toward benefiting both industries. The railways have made some efforts to unify the freight structure, but they argue that any further reduction of rates would mean handling coal traffic below cost. Since there has been no careful study of the cost of freight handling, nobody can argue with them on that score. Nevertheless, judging from the inefficiency of administration and fuel utilization, there can be little doubt that unit costs could be cut. An increase of traffic over the same railroads would also tend to decrease the costs. Any proposal to increase freight traffic, however, encounters at once the deplorable condition, both as to quantity and quality, of rolling stock available in service. Fundamentally more rolling stock is needed in China for the transportation of coal, hence purchase of rolling stock is essential. The railways and coal mines should cooperate to procure the necessary cars. In due time, these investments could be amortized from the revenue yielded by the increased coal traffic, and the money saved by increased production Shortage in rolling stock constitutes one of the main difficulties, experienced by many collieries in China. Kailan and Chunghsing are the only mines which own part of the rolling stock used in the shipment of their output. Others, less fortunate, have to depend up upon the depleted supply of railway-owned cars. The Manchurian mines usually had access to sufficient rolling stock because the

13e

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the South Manchurian Railway Company was state supported for its strategic advantage. Despite planning, efforts to remedy the car shortage in China Proper have as yet met with little success. At a 1931 conference on the coal industry, proposals were made for the purchase of new units of rolling stock by the various coal mining companies. These new cars were to be leased to the railways, and at the end of a certain period, they were to be taken over from the mining companies by the carriers. It was proposed to finance the project through the issuance of 20 million-yuan worth of bonds. Part of the proceeds was to be used to provide additional operating capital to certain collieries (87, p. 233). Although the plan was never carried out, it represented a step in the right direction. Post-war operators should carry out such a project. Other suggested remedies for the shortage are as follows: Encouragement by railways, through freight reduction, of increased shipments during "slack" traffic months; and the placing of orders by collieries ahead of time. Finally, as a further direct subsidy to the railroads, it was suggested that the Government collect mining taxes to be extended to the railroads as loans. As phrased by Κ. N. Chang: (78, p. 316) It has been suggested that the government should make the necessary appropriations to cover any deficit in the loan service funds of the railroads.... The government may undertake mining on its own account or encourage private initiative thus enabling itself to set aside for the service of railroad loans a percentage of the revenue either from its own mining operations or from mining taxes or monopoly levies on privately-owned mines. Since mining development depends to a very great extent upon an increase of the railroad network, the appropriation of part of the mining profits or mining taxes for the support of the service on railroad loans would be the most logical measure. This proposal applies mainly to coal as it constitutes 90% of the mineral traffic of the railways in terms of tonnage. Such an agreement would be feasible for the coal industry if new railways could be built to tap the undeveloped coal deposits, but existing collieries with rail connections have already paid their share of the railway financing through building parts of the railways and paying freight charges.

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TRANSPORTATION

The future development of transportation will have a direct bearing on the exploitation and distribution of coal. If transportation facilities could reach hitherto known areas of unexploited coal, such deposits would in all likelihood be developed to an extent as to justify the capital invested in both the coal and transportation industries. China has large deposits of high-grade coal scattered over the country, hence it is important to plan the transportation routes carefully so that a maximum amount of coal could be tapped and brought to the consuming centers at minimum space movement. An examination of the following map will show the interrelation between proposed plans of rail development and the actual location of coal reserves and markets. Possible development of new industrial areas will be discussed later. In the future, coastal and inland shipping will probably continue to play second fiddle to railways in the transportation of coal. There seems no reason, however, why China cannot develop a merchant marine to handle her own 4 million tons of inland, coastal, and export coal trade instead of depending upon foreignowned vessels. China should be able to acquire some ships from Japan and the United States. Yet to suit Chinese conditions, it will also be necessary to build specially designed ships. For instance, only medium-sized vessels, carrying coal or other cargo, can sail past the Kiukiang sandbars in the lower Yangtze all year round. If a fleet of 5000 to 7500-ton vessels were acquired, larger volumes of coal could be transported all the way from Chinwangtao, Dairen, and Tsingtao via the Yangtze to as far as Ichang. Similarly, more coal from the Peiping-Hankow and Tientsin-Pukou Railways could reach the central China markets by the Yangtze River. Ships should be powered by steam rather than oil because coal is more cheaply available in China. The principle of shallow-draft vessels should be fully utilized in building all classes of coastal and river craft in order to make China's waterways more fully navigable. These have the further advantage of partly compensating for the lack of port facilities. But the construction of cargo ships must go hand in hand with development of port facilities. The development of Nanking and Hankow as river ports would aid Shanghai in facilitating coal distribution, as well as the distribution of other commodities in the Yangtze valley. The development of Canton as a deep water port would cut transshipment costs from Hongkong, and break the Crown Colony's dominance over the South China trade.

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Coal transport by ocean steamers will have local importance in areas lacking sufficient railways, but having access to the sea or large rivers. Native junks and barges represent the relics of an old civilization which are being gradually pushed aside by modern transport. But at least in the period of transition, they will continue to exist and carry goods on hauls, where conditions favor, as the horse and buggy persist in a land of automobiles. Perhaps with the installation of small power plants, they could navigate rivers and canals under their own power. Eventually, these small boats will probably be replaced by railways and trucks for hauling coal; or by motor-propelled or towed barges with open or closed hatches, depending on the size of the waterways affected. Until the highway system of China is greatly improved and expanded, there would practically be no transportation of coal by trucks. Even in a highly industrialized country like the United States, motor transportation of coal has not been important except for distances of 30-50 miles. In 1941, about 8% of the US bituminous coal and lignite was shipped by trucks. Hence it is unlikely that trucks for large-scale long-haul coal distribution can become important in China. But for urban coal distribution, perhaps Diesel trucks, which could use gasoline substitutes such as vegetable oil, can be more widely applied in China. Future railway development is an important question. Chang KiaNgau, former Minister of Communications, suggested a ten-year railroad program for the development of 14,300 miles of railroads in two stages (78). During the f i r s t stage, 7,155 miles would have to be built, with the primary objective of knitting together all the political and military centers of the country, and assisting in the developing of the most essential mineral resources. During the second stage, a total of 7,145 miles of important trunk lines will have to be constructed to develop the frontier and coastal provinces and to open more overland routes to neighboring countries. Such a program would tap not only the coal resources but also the markets. In conjunction with railway development, coal deposits were recently discovered along the southern section of the Canton-Hankow Railway, yielding a sufficient supply to lower the cost of coal in southern coastal China. Along the new railroads planned in the southwest, such as the Yunnan-Burma, Suifu-Kunming, and Kweichow-Kwangsi Railways, coal deposits were also found. In the provinces of Kansu and Shensi, several promising coal mines have

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been opened. The proposed Kweiyang-Weining Railway passes through iron and coal deposits. The Samshui-Kweilin Railway taps coal and antimony deposits in eastern Kwangtung and southern Fukien. The Fukien-Kwangtung Railway can develop the Lungnan coal deposits. The Chungking-Yuanling and Neikiang-Suifu Railways open up the Chialing-Nanchuan and Chien-Wei coal fields. Other examples could be cited, but enough has been said to point out the importance of railway development in coal exploitation and distribution. Especially important is the development of southern, western, and central China, where railroad mileage has hitherto been limited. Even in North China, more direct routes need to be opened to facilitate the marketing of coal. With an e f f i cient well-designed transportation network, the future markets of China should be amply supplied with cheap coal.

CHAPTER

IX

THE PROBLEM OF COAL MARKETING Few commodities have so wide and so varied a market as coal. In the United States, coal from 80 producing fields (6,000 operators or 10,000 mines) in 26 states was shipped in 1922 by 140 railroads to between 100,000 and 200,000 consignees (94). This does not include the hundreds of thousands of smaller consumers who are served by truck from retail yards. Comparable figures for China are not available, but the proper preparation and distribution of coal is as important to China's economy as it is to other countries. This need for more efficient means of merchandizing will become more evident in the post-war era of industrial expansion. The marketing of coal occupies an unique position in the industry. It involves the cleaning sizing, chemical and metallurgical treatment, and distribution of coal. The preparation of coal is usually handled by the collieries themselves. The chemical treatment and distribution of coal may be handled by separate manufacturers and middlemen. The segment of distribution dealing with transportation from mine to market area has already been discussed. (See Chapter VIII). A break-down analysis of the various charges which constitute the total cost of CNC$ 15.00 per ton of coal to the Kailan coal consumer at Shanghai (1936) will show the following approximations: Average cost of mining, 3.5 yuan; cost of preparation, 0.5 yuan; cost of handling from the mine to the railway station, 0.5 yuan; mine profit, 2.0 yuan; transportation via train and ship, about 6.0 yuan; and the rehandling, storage, and local distribution by company agents, 2.5 yuan. Though not exact, these figures indicate

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that even without chemical treatment the merchandizing operations involve as much money as mining. RELATION

BETWEEN

PROPERTIES

AND

USES

OF

COAL

For efficient marketing, it is necessary to know the properties of coals which qualify them for special uses. Thus large amounts of moisture, such as are carried by low-grade coals and lignite, may cause losses not only in combustion but also through the weathering from drying out in storage. Coals with high moisture and sulfur are also more liable to spontaneous combustion. High moisture also raises the weight of the coal, thereby increasing the freight charges. Freedom in burning increases with the amount of volatile matter, which may be variable composition. The heating power depends upon the relative percentages of both volatile matter and fixed carbon. Contrary to common belief, high-rank bituminous and low-rank semi-bituminous coals, rather than anthracite, have the highest calorific, or B.T.U. values. Ash is undesirable since it displaces carbon and its compounds, and if found in excessive amounts causes clinkering. Sulfur and phosphorous are injurious constituents when the coal is to be used in the manufacture of gas or for metallurgical purposes. Steam Coals. The most general use to which coal is applied is f o r steam-raising. Almost any grade of coal can be utilized for this purpose, but preference lies with those coals possessing high heating values, small tendency to produce smoke, and low clinkerproducing values, as well as fairly steady-burning qualities. It should also be sufficiently high in volatile matter to permit rapid response to firing. Bituminous coals are usually preferred. Bunker Coals. The coal burned in steamship boilers is known as bunker coal since the storage bins in the ship are called bunkers. If the boilers are designed for it, almost any kind of coal with proper treatment can be used. On the other hand, the ships want coal for which the boilers are designed. Because Kalian coal is suitable for European ships which frequent the China coast most, it is known as the best bunker coal in the Far East. Yet many American ships do not demand such coal, or any other coal, since they are generally designed to burn oil. One prime requisite for bunker coal, however, aside from high calorific value (which r e duces the tonnage required) is that it must be able to stand storage without undue tendency to spontaneous combustion. Many Chinese coals satisfy these requirements. Domestic Coals. Coal for domestic purposes should be hard,

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firm, and bright and blocky in appearance. As a general rule in China, the households demand lump coal or coal balls (mixture of fine coal and clay dried in the sun). Stokers are rare, hence sized coal is still not very much in demand. Theoretically, domestic coal should be low in ash content, free and steady burning. Anthracite, if cheaply available is usually preferable. There is a considerable market for it in Shanghai, even though the delivered price is high. China has large reserves of good anthracite, of which the Chungfu, Mentoukou and Taiyuan (several mines) varieties are most famous. Coking Coals. Beehive coking is rapidly being replaced by byproduct coking, hence coking and gas coals are now intimately related. There are minimum specifications, however, for high-grade coking coal. In western practice, profitable operations aim at 6070% coke yield. This coke must be able to stand the blast furnace charges. Generally, the volatile matter of good-quality coking coal should run over 30%, sulfur under 1.5%, phosphorous under 0.02%, and ash with 10% (95). Few Chinese coals satisfy these requirements without treatment. Most of the well known coking coals, such as those from Kailan, Penhsihu, Liuhokou, Pinghsiang, Chinghsing, and Chunghsing companies, are low in volatile matter, and high in ash. Gas Coals. The United States A.S.T.M. specifications are as follows (96): Gas coals shall contain not less than 35% (between 28 and 40%) volatile matter on moisture and ash-free basis; and the ash in the dry coal shall not exceed 9%, the dry coal shall not exceed 30 grains of sulfur in compounds other than hydrogen-sulphide, per 100 cubic feet of gas; and the coke produced shall be of sufficient size and strength for domestic use or for the manufacture of water gas. Here again, high ash is the disadvantage of Chinese coals. Without going into the details of the composition and quality of Chinese coals, only a few are tabulated here for comparison with selected representative coals of the world. Proximate Analysis of Selected Representative Coals of the World* „ , VolaType of Coal Fixed tile SulMoistCarbon Matter fur Ash ure Best Admiralty Steam (S.Wales) 83.4 12.1 0.7 2.8 0.9 Swansea Valley Anthracite 90.5 4.9 1.0 2.3 1.3

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61.2 34.9 Yorkshire House Coal 1.5 2.5 1.3 67.9 27.7 Durham Coking Coal 0.6 3.4 1.1 64.7 Durham Gas Coal 31.3 0.9 2.0 2.0 47-60 27-37 7-11 3.8 Saar Coals (Steam and Railway) 50-72 18.36 Ruhr Coals (Coking and Gas) 4-13 2-8 45-62 28-33 Upper Silesia Coking Coals 3-12 2-8 25.9 US Birmingham Coking Coal(Ala.) 66.8 1.5 4.9 2.4 25.7 26.6 US Goose Creek Lignite (Idaho) 2.5 13.4 :34.3 39.6 39.5 4.0 10.4 10.5 US Vermillion Bituminous (ΠΙ.) 88.2 1.2 Pennsylvania Anthracite 0.9 7.8 2.8 73.7 14.1 US New River Semi-Bit.(W. Va.) 0.8 8.2 4.0 3.7 9.4 0.7 48.2 41.8 Miike Steam Coal (Japan) 60.0 0.7 9.9 0.6 29.5 Kailan Coking Coal 50.0 33.0 Kailan Blinker Coal 15.0 2.0 40.8 44.7 1.0 6.2 8.4 Fushun Bituminous 86.6 3.0 Shansi Anthracite 8.9 1.5 74.0 17.9 Tatung Bituminous 4.5 3.6 66.6 21.7 0.5 11.0 0.7 Penhsihu Coking Coal 54.1 23.5 0.5 21.0 1.4 Pinghsiang Coking Coal 57.4 30.3 1.5 12.2 0.7 Chunghsing Bituminous 81.2 5.7 10.3 2.9 Chungfu Anthracite •(1) The World Coal Mining Industry-I, Geneva, 1938, p. 21. (2) Handbook, Chinese Institute of Mining and Metallurgical Engineers (in Chinese), Nanking, 1934, p. 54. (3) Chu, H.C., "Hopei Mines," Kwangyeh, (in Chinese), CIMME, Vol V, No. 18, August, 1932, pp. 69-70. PREPARATION

OF

COAL

FOR

MARKET

Up until now, due to the high quality of certain coal seams mined and the loose specifications of the Chinese market, most coal producers have sold their product uncleaned and ungraded. Even the majority of the modern mines only employ the first steps in sizing. In the future, consumer specifications will become more rigid because of technological advancement accompanying industrialization. The general adoption of the system of buying and selling coal as an article of definite calorific value, analysis and size would theoretically not only enhance its value as a marketable commodity, but would also lead to more economic utilization of coal. Chinese coal producers must be prepared to meet specific industrial demands, and at the same time should promote the uses of particu-

THE

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145

l a r classes of coal for purposes to which they may best be adapted. Coal must be prepared not only because of market requirements, but also because of excessive impurities (shales, clay and pyrite) which may occur in the coal or are mined with the coal. Though anthracite and coking coal have been cleaned in the U. S. for many years, the recent percentage increase of total coal prepared is associated with mechanical mining, a system which reduced hand sorting to a minimum. Chinese coal producers will have to cope with this situation when more mining machinery is utilized. But even now, coal preparation is vital since Chinese coals are inherently high in ash and sulfur, as well as being friable. The r e moval of as much impurities as possible, first in the mines, then in the preparation plants, would naturally benefit the industrial consumer, who in turn would be willing to pay more for better quality coal. For future considerations, coal producers should understand the problems of preparation from crushing and screening, to the amount of removable impurities and the percentage of coal recovery. Anthracite. The large "breakers" (as the large preparation plants are termed in the United States), characteristic of the anthracite field, are not found in the bituminous fields. The term "breaker" is said to have originated in the days when the coal was broken with hammers. Modern western practice involves hand picking to remove large fragments of "slate" and repeated processes of crushing, screening and washing of the different sizes. The breakers are constructed like modern factories with belts, "motors" and all kinds of machinery. The coal is delivered at the top of the building by conveyors from the mine shafts and comes out of the bottom into railroad cars, cleaned and sized. It passes over vibrating screens known as bull shakers which sort the lump coal from the smaller sizes. The lumps are then run over the picking table where larger pieces of "slate" are discarded. The middlings or "bones" and clean coal are crushed by rolls, screened and sent through various jigs, classifiers, hydrotators or Chance cones, and rheolaveurs to be cleaned and sized into egg, stone, chestnut, pea, buckwheat, rice ar.d barley sizes. These products are conducted by chutes and launders to bins ready for loading. The middlings are recirculated until the tailings are nearly free from coal. Even the "anthrafine" coal is cleaned by Dorr classifiers and thickeners and used for briquetting, recarburizing steel, sintering ores, and paint manufacture. By controlling the rolls, more of the high price variety of

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OF

coals could then be produced whenever market conditions justify. In contrast, most of the Chinese anthracite is simply handbroken and sorted, then dropped through some crude s c r e e n s built on the side of a steep slope by the shaft. Usually three s i z e s a r e produced; lump, medium and fine coal. It is also sold a s the r u n of-mine coal (all sizes mixed). Some of the s m a l l e r mines make coal balls for domestic heating. At present, the household coal m a r k e t in China is not so specialized because consumers generally buy whatever they can afford and is available to them, r e g a r d l e s s of rank, grade and size. F u r t h e r m o r e , there is no competition b e tween oil and anthracite, as in the U. S. This partly explains why anthracite cleaning plants a r e so r a r e in China. As f a r as known, there is one small cleaning plant employing the dry process at the Chungying Company at Mentoukou, and sizing plants at Chungfu Company in Honan. Bituminous Coal. At one time, even in western countries, p r a c tically all bituminous coal was sent to the m a r k e t as r u n - o f - m i n e . Considerable advance over this stage has been made in the United States, but probably more in continental Europe where the abundance of friable coal makes cleaning more necessary. Nearly half of the world bituminous output is now prepared for market. Bituminous coal, unlike anthracite, generally does not r e q u i r e additional breaking beyond that which r e s u l t s f r o m the mining and cleaning processes. Otherwise, the p r o c e s s e s a r e s i m i l a r . Wet p r o c e s s e s of gravity stratification a r e most popular, though pneumatic jigs and tables are also used. The sand flotation p r o c e s s is a s yet employed to only a limited extent for bituminous coal. Usually f r o m 4 to 8 sizes, ranging f r o m 6-inch lump to pea and carbon fines, a r e prepared In different fields in the United States. Unlike anthracite, the storage of bituminous coal is very i m p o r tant. If not properly stored, it can lose as much as 20% of its heating value, or even cause spontaneous combustion. Washing is extremely important for reducing the ash and s u l f u r content, especially for coking coals. Most of the washing plants a r e erected for- cleaning coking coal. There a r e several in Manchuria, notably Fushun and Penhsihu. In China P r o p e r , the Kailan Linhsi plant is most famous. Pinghsiang and Chinghsing also have two small washing plants each; while Chunghsing has one. At Liuhokou the coal is washed by primitive methods. At Linhsi where coal (in sizes 1/2" or less) is made into coke by beehive ovens, the ash content is reduced f r o m about 19 to 10% by washing (97). At Penhsihu, the ash is reduced f r o m 11 to 8.5% (98). This i s s i g -

THE

CHINESE

COAL

INDUSTRY

14T

nificant in view of possible improvement of coking properties of Chinese coals. Semi-modern sizing plants are more numerous in China Proper, virtually every company producing over half a million tons annually has such a plant. The fact that industrial demands for sized bituminous coal already exist points to more rigid specifications in the future. CONTRIBUTION OF SCIENCE TO ECONOMIC UTILIZATION

Coal has too long been regarded simply as a fuel whose sole function is to supply heat and power. Today it is also one of the most useful raw materials known to civilization. Through modern chemical processes by-products are now made into thousands of new commodities which have become essential to modern standards of living. In China, however, most of the coal has been burned directly, thus making valuable by-products unavailable. Although the ideal of eliminating direct burning of raw coal, whether for raising steam, for household purposes, or for producing metals, is still far short of realization, rapid progress is being made in the most industrialized countries. Processes of "improving" coal have been developed largely in Europe. This resulted from the necessity for supplying a substitute for natural gas and for supplementing the comparatively limited oil resources and available water power there. Perhaps for the same reasons it is equally important to make the best use of Chinese coal. Even in America, where all power resources are abundant, recent scientific research is aimed at creating larger coal markets for the surplus capacity of the coal industry. Carbonization. When bituminous coal is heated in the absence of air, the process is known as carbonization. Practically all of the by-product recovery now results from high-temperature carbonization at 1150 to 1250 degrees centigrade. In recent years, lowtemperature carbonization at 450 to 600 centigrade has been much studied. It yields less gas (though of higher value) and ammonia, provides a smokeless solid fuel (not coke), and requires less heat for manufacture. The light oils produced are also radically different in composition. In general, low-tempe rature carbonization, with its wider application to lower grade coals, may increase the coal market through new sources of demand. In China Proper, before 1937, only Chinghsing Company had byproduct ovens operating, and these were at Shihchiachuang subsidiary. Of the two batteries of ovens designed for a total daily capacity of 100 tons, only one had been completed by 1933 (99).

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THE

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OF

The various by-products did not find a ready market before the war, because of high costs and low purity. By-product ovens were being completed by 1937 at Taiyuanfu, Shansi province, and these seem to have more of a future than Chinghsing. It is significant that some progressive operators in China realize the possibilities of the by-product oven, the usefulness of which should increase with expanding industrial demands for coke and its by-products. It should be pointed out, however, that the U. S. now yields more by-products than there is a market for; much of the tar is simply burned as liquid fuel; coke is hard to sell; and ammonia has to compete with synthetic products. Even with possible greater demands of pig iron for coke, it will be some time before China can furnish large markets for by-products and manufacture coal-tar elements which can compete with European and American products. Still the Chinese manufacturer should not be discouraged because the wasteful beehive coking process is becoming uneconomical in modern practice. The by-product coking industry in China Proper may require some government protection and subsidy for its establishment. In Manchuria, under Japanese domination, more progress has been made than in China Proper. The Japanese Government-sponsored coordinated plan of industrial development created markets for the utilization of coke and its by-products. Three main districts produce coke by the by-product process, namely, Showa Steel (under the South Manchurian Railway Company), Penhsihu, and the newly discovered Tungpientao district. The 1936 coke output, which is the latest available figure, amounted to 736,000 metric tons (100), The corresponding by-products consisted of 117,000 metric tons of coke "breeze" or powder, 11,780 tons of ammonium sulphate, 39,900 tons of tar, 18,130 tons of pitch; 6,550 tons of benzol, and 7,830 tons of creosote. Probably, as a result of the expansion of the iron and steel industry in Manchuria, the 1944 figures doubled those of 1936. The future of by-product coking in this area depends, to a large extent, upon the Chinese Government's plans to exploit the iron and steel industry there. Since the largest iron reserves are in Manchuria, state development even at costplus basis for a number of years is likely. If this were the case, coke and its by-products will continue to find a ready market within Manchuria. Aside from these by-product facilities, a plant at Ssupingkai, Manchuria, utilizes the low-temperature carbonization process. The gases were usually consumed by the forementioned plants

THE

CHINESE

COAL

INDUSTRY

149

which produce them. The South Manchurian Gas Company and the Fushun Colliery, however, were able to supply the domestic m a r ket with an additional 1.5 billion cubic feet of gas in 1937 (100, p. 823). Speaking of gas plants, there were two at Shanghai in 1940. The British-owned Shanghai Gas Company Limited produced 30,000 metric tons or approximately 1.5 billion cubic feet in that year, while the Sino-Japanese-owned Greater Shanghai Gas Company produced 2,000 metric tons of gas. Both operations were said to be profitable (101). There is good reason to believe that "gas* could be profitably installed in several other large cities such as Tientsin, Peiping, Hankow and Nanking by using whatever process or kind of coal that is cheaply available. Hydrogénation. Bituminous coals containing not more than 85% carbon (calculated on the dry and ash-free basis), but preferably not too highly oxygenated, are most suitable for hydrogénation purposes. The finely ground coal is suspended in oil and reacted with hydrogen at 425 degrees centigrade and a pressure as high as 250 atmospheres to make synthetic oil. This process opens up possibilities of the greatest interest to all countries which possess much coal and little petroleum, such as China. There are no hydrogénation plants in China Proper, but in Manchuria, there are three enterprises, at Fushun, Ssupingkai, and Chinchow. The South Manchurian Railway Company plant at Fushun, capitalized at 16 million yen, was established in 1938, and employs a hydrogénation process developed by the S.M.R. and the Japanese Navy. The estimated crude oil production in 1939 was 20,000 metric tons. The Ssupingkai plant of the Manchurian Coal Liquification Industry Company utilizes both the hydrogénation and low-temperature carbonization processes, and produced 10,000 metric tons of gasoline in 1939. It was established in 1937 with a capital of 20 million yen. The third plant at Chinchow under the Manchurian Compound Fuel Company is capitalized at 50 million yen and began operations in 1940. It employs the Fischer synthetic process with an annual capacity of 30,000 metric tons of crude oil; and aimed at an output of 100,000 metric tons (100, p. 721) (102). Nothing is known about the competitive basis of these plants, but the Japanese bought their output of liquid fuel on a cost-plus basis. Due to the excessive costs, the liquefaction of coal seems far less applicable than carbonization in present-day China. Even in America, gasoline from coal is about three times as costly as that from petroleum. (See Chapter Π). Recent research in that country indicates, however, that synthetic gasoline costs can be reduced to 10

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OF

US cents per gallon from coal, which is less than twice the present gasoline costs from petroleum (103). Added significance to the liquefaction process is that, as of 1945, 80-octane synthetic gasoline can be made from natural gas (high in methane) to compete with gasoline from petroleum (103). The next step will probably be gasoline from coal. The possibility of liquefying coal economically in the future is a factor which cannot be ignored. Pulverized Coal. The use of pulverized coal has met with a large and increasing measure of success in recent years. It is extensively used in boilers and furnaces because of the more complete combustion and easier control of fuel and air supply. Furthermore, the sulfur and a reasonable amount of ash. do not greatly affect the coal qualifications, since the ash can be more readily disposed of as compared with stoker-firing of sized coal. For use in metallurgical plants, however, the sulfur and ash content must be low. Because powdered coal creates problems of fire hazard upon storage, it is usually pulverized just before application. Pulverizing coal is regarded as an impressive development, and may go a long.way toward placing the competition of coal and oil on an even basis. This is significant to China in view of the limitations in oil supply. The most enticing development yet devised by research men, especially the scientists of the US Bituminous Coal Research Inc., is the coal-fired gas turbine. This turbine is not turned by steam like turbines in most power houses; but derives its motive power from a tornado of hot gases made by burning a stream of pulverized coal and its action depends on heat alone. "There is a strikingly small difference between the amount of heat generated by a pound of coal and a pound of 100-octane gas. In other words,.use of a pulverized coal in a turbine is entirely feasible" (104). The problem of preventing ash from pitting turbine plates, and of controlling temperatures to avoid "burning" of the turbines are being overcome. The difficulty of pulverizing coal to talcum powder size is already whipped by the "coal atomizer." It is believed that this process can reduce railroad locomotive fuel costs to one-third or one-fourth of the present US levels (105). Perhaps similar adjustments can be made to reduce shipping fuel costs. Even the pulverized coal-fired freight plane and automobile are not impossibilities. Briquetting. This process is generally applied to low-rank lowgrade coals, which are friable and dusty or contain a high water content, such as peat, lignite and low-grade bituminous coals. Anthracite culm and fine sizes, bituminous and sub-bituminous slack,

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and residues from coking and oil gas, are also made into briquets. Briquetting of brown coal in Germany is most popular because the heating value can be materially increased, and because the briquets are more easily transported. The process consists of compressing powdered fuel into little bricks at rather high temperatures, with the aid of binders. Briquetting can be applied to many friable Chinese coals, especially lignite in Yunnan province. MODERN

COAL

MARKETING

CONTROL

Western marketing control practices are discussed here in the light of possible application to China. The practicable extent of nationalization of the Chinese coal industry is postponed to Chapter ΧΠ. Sufficient has been said about the market requirements of coal and the procedure in which the operators have followed to meet the demands. It is now necessary to explore the channels of distribution and the standards for handling coal. United States of America. Coal is usually bought and sold by the short ton of 2000 pounds, the old gross ton of 2240 pounds having been largely discarded. The recognized unit of computation for invoicing is the hundredweight. In the West, track scales are regarded as an essential part of mine equipment; while in the East, coal is weighed on railroad-owned and railroad-operated track scales at junction points and yards. Shipments are usually by carload lots. The coal in the car is usually the property of the purchaser (unless it is consigned to a company-owned selling agency), which looks to the carrier for damages in case of loss or confiscation. Generally, a tolerance of 2% is allowed on weight at destination as against the billed weight. There are three common methods of selling coal. First, direct from producer to consumer or retailer; second, indirectly through sales agents; and third, to or through free lance jobbers or brokers. The jobbér buys and sells in the open market. Many jobbers own and operate mines, the output of which they sell. While detailed data are not available, at least one-fifth of the bituminous output is consumed by the companies producing it; this figure seems high because the "captive mines" are included. The retail-dealers deliveries also average about one-fifth of the output ( 106), and a smaller percentage is purchased and sold by the Jobbers. Some smaller producers dispose of their product through Separately incorporated selling compànies. The majority of soft coal producers, however, contract for the direct sale of their product (94, pp. 276-90). Bituminous coal prices have been chiefly in-

THE

192

FUTURE

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OF

fluenced by surplus producing capacity, stocks, car shortage and labor troubles, and the general prosperity or depression of the country. The average retail price of bituminous coal fluctuated from US$7.70 per ton to US$9.15 between 1929 and 1941 (106). The marketing of bituminous coal was regulated nationally by the Bituminous Coal Act of 1937 (107). Though this act expired in 1944, it will probably be brought up again soon. About one-fourth of the anthracite is sold by the producer directly to a retail dealer, or to consumer: over one-half is disposed of through sales agents; and the remainder through jobbers. Because of the concentration of anthracite production in the hands of a few large companies (70% controlled by 7 large companies), its price is basically determined by the highest operating cost of these companies. P r i c e s for the remaining 30%, which is in the hands of hundreds of small producers, vary with the supply and demand. Before 1937 and the subsequent war boom years, the general price trend had been declining since 1929. The average retail prices of anthracite stove coal dropped from US$14.75 in 1929 to US$11.50 in 1935, as a result of the depression and the severe competition offered by the oil industry in the hitherto sheltered northern Atlantic anthracite markets. This cut in prices and production led to the formation of the Anthracite Industries, Inc., in 1936, to promote the greater use of anthracite. Germany. Coal in Germany is bought and sold by the metric ton. Most of the prices are made on the c.i.f. basis in which the seller takes care of all necessary charges, insurance and freight. Whereas, in 1913, about 52% of all coal mined was sold as raw coal (though in many instances it had been washed and sorted), this proportion had dropped to 40% in 1927 (108) and even more in recent years. The majority of the coal is now reaching the consumer in the form of briquets,* powdered fuel, products of carbonization, gas, electric current* or oil. There are ten regional coal mining cartels in Germany, of which by far the most important is the Rhenish-Westphalian Coal Syndicate, whose member collieries account for more than 80% of Germany's coal output, and practically all of the export shipments. • It

takes

3 tons

of

raw brown c o a l

t o make

1 ton

of

briquettes.

# T h e c o m b i n a t i o n of b y - p r o d u c t p l a n t s w i t h e l e c t r i c a l p o w e r g e n e r a t i o n i n t h e G e r m a n b r o w n c o a l s h a s e n a b l e d t h i s s o u r c e of e l e c t r i c i t y t o c o m p e t e f a v o r a b l y w i t h w a t e r p o w e r . B i t u m i n o u s c o a l was t h u s r e p l a c e d a n d s p a r e d f o r e x p o r t a t i o n .

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A l l ten of the syndicates are grouped in the National Coal Federation whose powers, exclusively commercial, are twofold: (1) to record the sales prices which are fixed by the regional syndicates f o r deliveries to the non-competitive home markets and to submit these prices to the Federal Coal Council for promulgation by the latter; (2), to participate in the organization of the domestic coal trade by means of an agreement with the Central Federation of Coal Merchants (109). In its market practices, the Rhenish-Westphalian Syndicate distinguishes strictly between sales for delivery to the competitive markets (exports, plus Hamburg, Bremen and the region east of the Elbe), and the non-competitive markets (domestic market, aside from the outlets listed above (110). The control of sales prices is far less rigid in the competitive than in the non-competitive domestic markets. In 1936 the average value of coal per metric ton at the pithead was 10.41 R.M.; while the export price was 9.35 R.M. (f.o.b. port of export) (109, pp. 199-201). This large discrepancy (considering freight cost to port of export) is made up by a compensatory tax levied upon all collieries. In other words, a part of the profits in sales for delivery to the non-competitive market is recaptured for subsidizing the sales in the competitive markets. Thus through a monopoly system, the profit margin is spread evenly among all collieries to promote both domestic sales and exports. The syndicate reserves the right of making direct sales to a number of very large consumers: For example, the state railways, municipal gas works and steam-power electrical plants, and c e r tain big metallurgical establishments. It also has its own distributing companies, which supply all consumers using annually 600 tons or more. The remainder of the coal is turned over for sale (at a rebate of 6% from the quoted prices) to a number of wholesale agencies each of which enjoys exclusive rights over a particular market. Part of the coal is thus distributed through regional Coal Sales Societies in markets where only one body of this kind exists; the rest is distributed through regional Coal Sales Combines made up by agreement between two or more such societies. Great Britain. (108) (109). Coal in Great Britain is bought and seid by the long ton. The prices are generally on the f.o.b. basis, except for export trade where the c.i.f. method is more commonly used. The amount of treated coal is about 45% while the remainder is sold as raw coal. In 1938, the quantity of coal exports as crude coal, coke, and patent fuel for bunkering steamers engaged in

154

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foreign trade amounted to 50 million tons or over 20% of the total production (111). Like many other countries, freight charge privileges are given to encourage exports. The export trade constitutes a very important part of the business of the industry and merits corresponding attention. Collieries usually sell their coal through salaried salesmen directly to a consumer, a factory, a merchant, or a shipper. Sometimes, however, an associated selling agency is established to dispose of the output, whether of a single colliery or of a group of collieries. About two-thirds of the output is disposed of independently, while 7% is sold through selling agencies in which the colliery, some of its directors, or others engaged in its management has a financial interest. Such selling agencies are common, in South Yorkshire and particularly in South Males. Usually, this work is done on a commission basis, at a charge of about 6d per ton during the pre-war years. One of the most important selling agencies is the Doncaster Collieries' Association. There are various methods for reaching the consumer in the British export trade. Several of the large companies sell through their own salesmen directly to the shipper or to the foreign consumer; some have even acquired interests in shipping firms, so that production, sales, and deliveries are centralized under one cartel. Most of the smaller producers, however, sell through export firms, who attend to all the shipping details on a commission basis. The volume of export trade carried on directly with the consumers is relatively small in comparison with that done through middlemen. The risks connected with freight and foreign liabilities have deterred most of the mine owners from adding shipping to their undertakings as producers of coal; hence, the export trade is in the hands of merchants who are prepared to take such risks. These middlemen maintain close connection with British coal companies and foreign markets, and experience no difficulty in disposing the coal. In contrast with these coal-export merchants, there are also speculative middlemen whom the domestic operators invariably dislike. In Great Britain the voluntary efforts to curb competition between collieries by means of marketing schemes on a district basis led to the passage of the Coal Mines Act of 1930, since amended. Finally, in 1936 these central selling schemes were put into effect. Broadly speaking they fall into three main types. First, there is complete centralized control of sales where a single sales agency

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handles the combined output of the individual collieries. Second, there is central supervision over a coordinated plan of sales whereby each colliery still makes its own sales. Third, there are central selling agencies, each of which handles the output of a group of colliery undertakings arranged into a marketing unit. MARKETING OF CHINESE

COAL

There are no standard systems of weights and measures in China, obviously an obstacle in the marketing of all commodities, including coal. The metric ton, equivalent to 1680 old Chinese catties, is recognized by the railways and the wholesale distributors; but in local or retail trade, where small amounts of coal are distributed to each household by wheelbarrows or carts, the old Chinese catty is still very much in use. The situation has been further complicated by the introduction of the "kung chin" or new metric catty, which corresponds to half a kilogram. In the matter of linear measurements, the kilometer is used in railways, the English nautical mile used by European ships, and the Chinese " l i , " equivalent to about one-third of a mile, is generally employed otherwise. Such complications resulted from China's contact with both the English and metric systems. Modern coal marketing practice requires a common basis for business transactions, presumably the metric system for coal is here to stay. China Proper. No overall figures are available for the percentages of coal handled by direct sales to consumer or retail merchant, and through wholesale agencies. It is known, however, that the speculative middleman definitely constitutes the minority. Among the large companies, Kailan, Chunghsing, Chungfu, and Huainan are the best organized for marketing. Kailan has main branches at the four large ports of Chinwangtao, Shanghai, Tongku, and Hongkong. It makes direct sales for export and bunker purposes at the first three ports, but at Hongkong, Kailan sells most of its coal through an agent, the Dodwell and Company, Ltd. Kailan also has sales agencies (usually shipping firms which handle its coal at a commission) at Peiping, Chefoo, Weihaiwei, Tsingtao, Hankow, Amoy, Swatao, Foochow, Canton and many other places. The distribution by sales agencies, however, is not as important as direct sales. Chunghsing maintains sales departments in 17 cities along the Tientsin-Pukou Railway, 3 cities on a branch railway near the mine, 3 cities on the Nanking-Shanghai Railway, and 4 cities along the Grand Canal. Most of its coal is sold directly to retailer or consumer. The Peking Syndicate merger, Chungfu

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Company, sells directly in various cities along the railways near the mines; and also sells through agencies in distant markets, such as Tientsin and Yangtze ports. Huainan, under Government auspices, maintains branches at Shanghai, Pukou, Pangfu, Wusi and several other cities, jûside from direct sales, it also sells some coal through agencies. The Government has a distributing agency in connection with the mines; this agency also sells the anthracite of Hsiehchi Company. Such an arrangement is rare in China, and has proven to be advantageous because sales efforts are centralized, thus reducing the personnel and marketing charges. The conventional method of purchasing coal from such large companies is to buy it at the nearest company distributing center, rather than f.o.b. at the mines. The medium-sized companies producing between 100,000 and 750,000 tons annually, such as Chinghsing, Liuhokou. Chungying (Mentoukou) and Chinpei (Tatung), sell the bulk of their coal via sales agencies or "Tai-Hsiao-Chu" on a commission basis. The mining company generally assumes the responsibility of transportation and handling while the agency stores and negotiates the sale of coal. But large amounts are also sold directly at the branch offices located near railway stations. Chinghsing sells very little of its coal at the mines, some coal is contracted c.i.f. to individual consumers, but most of it goes to sales agencies located along Cheng-tai and Lung-hai Railways. Liuhokou did away with its sales departments and wholesale transactions in 1935, and contracted all its coal to be sold by the Tungho Company, which is a distributing company jointly formed by the Kincheng and Yenyeh Banks and the colliery. (Liuhokou coal is handed over to this distributing company at the railway station.) The Chungying Company delivers its coal to Tientsin and Peiping to be sold by sales agencies. The Chinpei Company turns over most of its coal to a single wholesale dealer which in reality is its sales department; it also sells coal, however, on a commission basis. For the numerous primitive mines practically no modern transportation facilities are available, hence the coal is usually sold directly to consumers or retailers who supply their own camels, donkeys, or carts for transporting the coal they purchase. Sometimes a larger mine of this type also contracts to deliver coal at a nearby city to which it must provide the means of transportation. The volume of business per mine is small, and the marketing charges depend a great deal upon individual bargaining. Some of the native mines sell all their coal to a nearby colliery which de-

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l i v e r s it to the markets. Recently, a sales and transportation agency was organized at the Mentoukou district (west of Peiping) to handle the output of several hundred coal "pits." This project should be successful not only because transportation and sales charges can be reduced, but also because cut-throat competition among the native mines can be prevented in a market where there is room f o r all. By reducing costs, both sales and production can be promoted. In many cities, the sales agencies and retailers have to belong to a "coal guild" to sell coal. Such an organization, called "MeiPu-Tung-Yeh-Kung-Hui, " once existed at Peiping and may still exist. The membership consisted of managers of all coal stores having a capital of more than 5000 yuan (113). This organization, which was registered with the Peiping Chamber of Commerce, met once a month to discuss coal sale problems of mutual interest. However, it was not a joint marketing concern, merely one to promote good will among the coal stores. In many old-fashioned retail coal f i r m s , a tip of say 20 Chinese cents per ton is necessary f o r coal purchase at the "Hao-fang" or waiting room. This practice is not considered corrupt in China. The cost of local delivery naturally depends upon the distances and means available. Some consumers provide their own transportation facilities. The actual prices depend upon whether the customer buys the coal as "spot sales," or buys through monthly accounts or even longer contracts. The following table shows the general conditions of the wholesale coal trade at Peiping in 1933. Peiping Coal Trade, 1933 (114)* (Yuan Per Metric Ton) Company

Coal Size Price to Handling Charge Coal Company From R'way Car

Liuhokou

Unsized Large

8.30 9.30

Chinghsing Unsized

8.50

Chengfeng

Unsized

8.10

Unsized

7.80-8.00

Unsized

7.50

Lincheng

0.40 0.40 Determined by bargaining 0.50

Method of Sale

Sales Agency Sales Agency Sales Agency Direct by Contract Sales Agency

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Yili

Unsized

7.45

Kailan

Large Fine Large Fine

8.30 7.40 8.10 7.25

0.30 0.25

Direct Sales Direct Sales Sales Agency Sales Agency

Chinpei (Tatung)

Large

10.30

0.30

Sales Agency

•Assuming 20 metric ton carload transfer at railroad stations. The data on the price spreads of various coals are far f r o m complete. The following table gives a general idea of production costs and f.o.b. mine values of average coals. A subsequent graph shows the wholesale coal prices in Shanghai during the pre-war years. Price Spreads of Selected Chinese Coals, 1933 (Yuan P e r Metric Ton) (114) (115) (116) C ompany

Variety

Production Costs F.O.B. Mine Value

Kailan Kailan Chinghsing Liuhokou Chungying Liukiang Pingtingpaochin Chunghsing Huainan Luta

Bituminous Coke Bituminous Bituminous Anthracite Anthracite Anthracite Bituminous Bituminous Bituminous

3.70 3.30 4.50 3.50 3.50 2.50 5.00 4.50 5.00

6.80 12.00 4.00 4.50 5.00 4.00 4.50

Manchuria. The marketing of coal in Manchuria formerly was done in about the same manner as in China Proper, except that the largest mines were controlled either by the South Manchurian Railway Company or by Japanese-dominated joint interests even before 1931. At that time, the coal produced from mines like Fushun and Yentai was earmarked for special purposes by the companies; it went to the railways, the power houses, and the ships for bunker and export purposes. Coal from Penhsihu was transformed into coke f o r blast furnaces. Direct selling was the general practice.

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The Japanese were financially strong enough to control the coal trade of the most up-to-date mines anyway. After the Japanese took over Manchuria the marketing of coal and its products was more closely centralized under the same large financial interests as in Japan itself. The technical end of marketing was under companies like the South Manchurian Railway Company, Manchuria Colliery Company, Manchuria Mining Development Company, Jehol Mining Company, Manchuria Industrial Development Corporation, Showa Steel Works, Penhsihu Colliery and Ironaand Iron Works, Manchurian Compound Fuel Company, Manchurian Coal Liquification Industry Company, Manchurian Gas Company, and their subsidiary companies. The distribution end was centralized under the Japan-Manchoukuo Trading Corporation, a quasi-governmental concern, which engaged ïri the buying and selling of all products of its holding companies, those mentioned above and others. It was established to taike over the former sales departments of these companies, and in reality, acted as a wholesale merchant for them. Capitalized at 30 million yen, it maintained a network of sales organs all over Manchuria, (102, p. 21). China Compared to the West. China has no cartel system of distribution like Germany, no predominantly strong financial interest like Japan, no market allocation and associated sales organizations like Great Britain, and no regulated marketing system like the United States. The only control that approached any plan of m a r keting was that enforced by the Japanese Government in Manchuria. That there is a need for joint action is clear because a "National Associated Office of Coal Mines" was formed under the guidance of the Ministry of Industry in 1936 for this purpose (117). This plan, in which coal producers sought to promote the regulation of output and sale of coal through regional allocation of markets among groups of coal companies, however, was unfortunately never carried out. Neither the technical nor the distribution end of marketing in China approaches western standards. The Chinese coal industry must adopt some plan for expanding markets and promoting the use of coal and its by-products. An extensive program of industrialization and education will create such a demand. Meanwhile Chinese producers should seek to improve the quality of coal in order to meet future rigid market specifications. With the aid of foreign experts, the technical problems could be solved. As to the financial end, if there are markets to absorb high quality products, then

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private investments and government subsidies would be justified. Next comes the question of distribution, which the Government is in a position to facilitate. For instance freight rates on state railways can be standardized and reduced. The Government can promote the formation of joint sales agencies to reduce coal marketing charges; it can also strengthen cooperation among coal companies to prevent cut-throat competition or over-expansion. E f f i cient marketing is an important phase in the development of the Chinese coal industry; the Government and the private producers must work together to achieve this goal.

CHAPTER

Χ

SOURCES OF DOMESTIC COAL CONSUMPTION

It is impossible to determine with accuracy the actual coal consumption in China. During normal years it must of course approximate the production corrected by the net foreign trade (the difference between imports and exports), which usually amounts to between 5 and 10% of the average output for China Proper and from 20 to 30% of that of Manchuria. Although the volume of foreign coal trade is pretty accurately known from customs figures, the statistics on coal production are not equally reliable; hence, an estimate of consumption is no more accurate than the production figures. It can be safely stated, however, that the pre-1937 coal consumption of China (including Manchuria) was in the neighborhood of 30 million metric tons annually, or approximately 3% of world consumption. In terms of per capita consumption, the figure would be 0.07 metric tons annuàlly for 1936, which was about 1/8 the rate of Japan, 1/35 that of Germany, and 1/50 that of the United States and Great Britain for the same year. The trend of the total coal consumption in China, and the consumption by uses for 1934 are shown in the following charts. It is strikingly apparent that coal consumption is rising in China; the 1936 consumption being twice that of 1916. Still, the low degree of industrialization, especially in China Proper, is revealed by the high percentage of household coal consumption. Only one-fifth of the world's coal is used for this purpose, while in China, nearly one-half is thus consumed.

COAL CONSUMPTION BY USES FOR CHINA IN 1934· ( T o t a l of 2 8 . 3 M i l . Met. Tons)

'Calculated from (1) For China Prope r: Gene r a 1 St atemeηt on t he Mining Industry (in Chinese), Special Report No. 4, Geological Survey of China, 1935, pp. 113-114; and (2) For Manchuria: JapanMa ne h ou k ti o Yearbook , 1941, Japan Manchoukuo Yearbook Comp a η y , Tokyo , 1941, p. 709.

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165

INDUSTRY

CONSUMPTION

China Proper before the Sino-Japanese War. The Geological Survey of China gives the best pre-war estimate of coal consumption. After arriving at the total consumption derived from production minus net trade (the coal exports exceed imports in China Proper), it proceeds to break this total into various consumption channels. For some of the minor uses, such as the metallurgical industries and the railways, the quantities are known in detail; but the bulk of household consumption had to be estimated. In terms of significant figures, the individual items should not be totalled to the hundredth or thousandth place, but it is necessary to do so in order to present what is known. The 1934 consumption is presented in the following table: Coal Consumption by Uses in China Proper, 1934 (118)

Million Metric Tons

Percent

Household Railways Colliery Shipping Metallurgical Other Industrial

10.5 1.75 1.13 1.10 0.465 6.0

50.0 8.4 5.4 5.3 2.2 28.7

Total

20.95

100.0

Uses

Household consumption. This is estimated by assuming (a), that 36 urban centers with 17 million population use a total of 0.2 metric tons per capita per annum or 7.1 million metric tons. The total of (a) and (b) amounts to 10.5 million tons or approximately half the total coal consumption. L. G. Ting (119) makes a different assumption but arrives at approximately the same conclusion. He assumes that (a)·, North China with 130 million population uses 0.04 metric tons per capita or a total of 5.2 million metric tons; and (b), South China with 290 million population at a rate of 0.02 metric tons per capita (this rate is assumed to be half of North China's because of a milder climate) consumes 5.8 million metric tons. Thus China Proper uses an annual total of 11 million metric tons. It is impossible to judge the accuracy of the proposed figures,

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but the order of magnitude seems about right. The household figure must be somewhere between one-third and one-half of the total coal consumption in China Proper. Railway consumption. The Geological Survey of China estimated the railway consumption at 1.75 million metric tons in 1934. This seems rather high compared with that given in "The Statistical Reports of the Ministry of Railways for 1934" which amounted to 1.55 million metric tons. Κ. N. Chang believed that only 1.29 million metric tons were consumed in 1934 (120). The actual consumption would probably be close to 1.5 million metric tons in 1934 or 7.5% of the total coal consumed in that year. Colliery consumption. It is very difficult to estimate the coal consumption in Chinese coal mines. In western collieries, about 5% of the total output is consumed to generate the power and heat needed to operate the mines (121). The Geological Survey of China estimated that for "modern" Chinese mines, which produce over 100,000 metric tons annually, the mine consumption is 6% of the output. This seems reasonable because though Chinese mines are not as mechanized as western mines, they generally consume larger amounts of coal for pumping purposes. For semi-modern mines which produce less than 100,000 metric tons per year, the mine consumption, according to the above source, can be as high as 15% of the output. In spite of the low efficiency of machinery around these mines, this figure, if taken as an average, appears far too high in view of their relatively small use of power. It was also suggested that the native mines consume 3% of the coal output. This is strange because hardly any machiney is used in such primitive undertakings. However, the Survey may have assumed that 3% was used by the miners themselves. The overall mine consumption of 1.13 million metric tons or 5.4% of the total Chinese coal consumption in 1934 is probably of the right order of magnitude. Bunker consumption. Coal consumption by Chinese steam vessels is figured on the assumption that 2 tons of coal are needed per ton of shipping annually. Hence for 550,000 tons of Chinese ships, the figure would be 1.1 million tons or 5.3% of the coal consumption in 1934. There is really no accurate way of gauging this item of consumption because reliable information on the performance of the various types of Chinese steamships is unavailable. Metallurgical consumption. As for the 1934 consumption of coal for metallurgical purposes, the Geological Survey of China gives the following figures: (118)

THE

CHINESE

Iron smelting Antimony refining Tin smelting Salt, Sulfur & Petroleum Copper and Lead Total

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167

265,000 metric tons 25,000 20,000

150,000 5,000 465,000 metric tons

This estimate is probably close to the truth because there are few modern metallurgical plants; they could have furnished the actual coal consumption figures. However, since the number of operating iron furnaces was limited in China Proper, the item of iron smelting seems high, unless the Manchurian plants were included or an estimate made for the native furnaces in China. Assuming that the proposed tonnage for metallurgical consumption is correct, China Proper still uses only 2.2% for such purposes in contrast with general western standards of 15 to 20%, Other industrial purposes. The Geological Survey of China did not try to estimate the various items under "Other Industrial Purposes," but merely mentioned electric utilities, cotton mills, and chemical plants. The total of 6 million tons or 28.7% is derived from subtracting the above uses from the total of 20.95 million tons. Reliable information indicates that the consumption of electric utilities amounts to between 1.50 and 1.55 million metric tons in 1934 (122). The consumption of the cotton mills amounted to between 1 and 1.5 million metric tons annually. There is no detailed information on the consumption of chemical, cement and other similar industries. A significant item of coal consumption for gas manufacture in modern industrialized countries is entirely lacking in China Proper. Two little coal gas plants at Shanghai are hardly worth mentioning. Free China during the War. In order to carry on the war, "Free China" migrated to the hitherto relatively undeveloped southwest and northwest. Small scale industries and metallurgical plants were built and together with military demands, the coal consumption steadily increased to three times the pre-war figure for the same regions. The tonnage and percentage of consumption of the southwest in 1939 is reported as shown on the following page. The general pattern of coal consumption in southwest Free China progressed to the level of pre-war China Proper. Household purposes still consume most of the coal, and although the actual consumption increased, its relative percentages declined in compari-

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Coal Consumption of Southwest Free China, 1939 1000 Metric Tons (123) Uses

Szechuan Yunnan Kwangsi Kweichow Sikang Total

Industrial 1,200 Metallurgical 30 Communications 180 Household 1,140 Total 2,550

16 8.2

13

1.6

21.3 142.0 171.5

22 35

274.0 275.6

1

1,216

Percent 39.7

53.8

1.7

201.3

6.6

9.5 1,587.5 26.5 3,058.6

51.9 100

son with 1934. Railway consumption is insignificant, since there are practically no railroads in that part of China. Possibly the small steamers, operating in the Upper Yangtze and its tributaries, consumed much of the coal listed under "communications." To the existing non-ferrous smelting and refining facilities were added a few iron and steel furnaces from occupied China. The metallurgical coal consumption probably further increased when some new plants were finally put into operation. The most notable advancement, however, was coal consumption for general industrial purposes. By the end of 1942, over two thousand factories (using mechanical power) were registered with the Ministry of Economic Affairs (123, p. 434); this number represented a six-fold increase over the pre-war figure in the area known as Free China, and does not include some 100-odd new and larger state factories established. Though the greater coal consumption here was stimulated by wartime industrial development, it will probably not decline to the pre-war level because (1) it would be uneconomical to re-assemble the interior factories in the coastal provinces and (2) the southwest and northwest are independent self-sufficient areas which could consume the products produced. Manchuria during Japanese Occupation. The consumption uses of coal in Manchuria reflect an intermediate stage between China Proper and western standards. As early as 1934 the degree of industrialization was far above China Proper. But the industries in China Proper, which consume most of the coal, are concentrated in communication and urban centers; these are comparable to Manchuria. Under Japanese planned development, Manchuria has

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made tremendous strides toward a highly modernized area. The progress can be seen even from comparing the coal consumption figures of 1934 and 1937. The 1941 coal consumption can be estimated as 20 million metric tons, and, according to one source, may have reached 30 million tons by 1944 (123a). The character of coal consumption in 1941 can be seen from the proposed 5-year plan of 1937, which is included in the following table. Coal Consumption in Manchuria*

Uses

1934 1937 1941 Thousand Thousand Thousand metric P e r - metric P e r - metric Pertons cent tons cent tons cent (Proposed Goal]

Household Railways

1,960 1,660

Shipping Industrial: Heavy Other Total

864 2,840 (1,174) (1,670) 7,330

26.8 22.6

2,000 2,043

17 17.3

2,100 3,000

9 12.8

11.8 798 38.8 7,000 (16.0) (1,843) (22.8) (5,160) 100.0 11,840

6.8 58.9 (15.9) (43.0) 100.0

1,150 17,150 (8,340) (8,810) 23,400

5 73.2 (35.6) (37.6) 100.0

*Japan-Manchoukuo Yearbook, 1941, Japan-Manchoukuo Yearbook Company, Tokyo, 1941, pp. 709-711. The data was derived from the above source. The total consumption figures of 1934 and 1937 are given, but that of 1941 was calculated from the proposed 5-year plan of 1937. The consumption was to be the difference between the production and 5.6 million metric tons of exports. In some cases the household consumption had to be estimated. The relative percentages are calculated. Household consumption. Unlike the vague estimates given for China Proper, the Manchuria figures are based upon the difference between total consumption and known individual items. The consumption is in turn derived from production minus net exports (Manchuria imports very little coal). So far as is known, the household consumption increased only slightly during the period of industrial expansion because the new industries consumed all the additional coal Manchuria could produce. Hence the relative percent-

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ages decreased from nearly 30% to less than 10%. But even in 1934, the per capita household consumption was double the rate in China Proper, a natural relation because the average temperature is lower in Manchuria. Railway consumption. The 1934 railway consumption of 1.66 million metric tons, or 22.6% of the total coal consumption, r e flects the high degree of railroad development in Manchuria. Even in that year, the tonnage of coal thus consumed was as great as China Proper, which has a population and area nearly ten times that of Manchuria. In 1937, the actual tonnage of railway consumption increased slightly to 2.04 million tons, but the relative percentage decreased to 17%. The proposed plans of 1941 show another small increase in actual volume, with a corresponding decrease in relative percentage. It is apparent that the rate of growth of railways after 1934 was not as fast as the general industrial growth; and that railroad mileage was approaching a saturation stage, extensive enough to handle all the traffic in Manchuria. Bunker consumption. The amount of bunker coal consumption depends upon the volume of foreign trade, the amount of internal river transport and the extent of coal utilization as fuel for ships. Evidently, these factors have not changed considerably in Manchuria because the bunker coal consumption remained stationary at around one million metric tons annually. Shipping development, like the railways, has already passed the stage of rapid expansion. One reason for this is that coal production in Japan had reached a peak so the Japanese Government set up industries in Manchuria where additional coal was available, thus relieving shipping demands and hence restricting bunker consumption. Industrial consumption. The consumption of coal for industrial purposes other than railways and shipping is not itemized because detailed information is lacking. The actual consumption probably increased six-fold between 1934 and 1941, reaching 17 million metric tons in the latter year. It is not likely that all the industries are profitable, the great expansion resulting rather from plans for future military necessity. This is especially true in the case of heavy industries which require large investments. The development r e quired for World War Π justified the Japanese Government's prewar subsidy. Whether these enterprises can be going concerns after the war remains to be seen; if not, they are likely to reduce their coal consumption. Though not all individual items are known, the following figures for 1934 seem reliable: Iron works, 1.17 million metric tons or

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16%; general manufacturing 0.8 million metric tons, or 11%; colliery consumption, 0.6 million metric tons, or 8%; and electrical utilities and gas works about 0.3 million metric tons, or 4%. The combined consumption was less than 3 million metric tons, or 39% of the total coal consumed for that year. By 1937 the situation changed considerably. The iron and steel industry consumed 669,000 metric tons of coal in excess of the 1934 figure or 1,843,000 metric tons, but it was still 16% of the total. The greatest increase during this period was in general manufacturing and electrical industries where a 3.5 million metric ton increase was recorded. The railway expansion following 1931 facilitating the movement of the supplies and products produced this result. Between 1937 and 1941, the emphasis was on developing heavy industries. The 5-year plan of 1937 estimated that 8.3 million metric tons of coal were needed for these, an increase of 6.5 million tons over the 1937 figure, or more than 400%. Meanwhile, the coal consumption in the manufacturing industries was also expected to increase some 3.6 million metric tons over the 1937 figure. The consumption of coal indicates that Japanese strategic development of Manchuria took place in three stages. The emphasis at f i r s t was on mining, railways, and shipping, next on manufacturing industries, and finally on heavy industries. Recent reports indicate that light metal industries, such as aluminum and magnesium plants, had also been initiated there along with heavy industries. REGIONAL

PROBLEMS

OF

COAL

CONSUMPTION

The market radius of coal from each of the main production centers is determined by a complex set of economic factors involving the nature of coal as a commodity, transportation costs and facilities, rate regulation, differences in the quality of coal, and the needs of the consumers. This complexity of factors reacts to create certain market regions and consumption centers which draw their supplies mainly from one group of coal fields, or closely associated groups, during a normal year. Demand and Supply of Coal in China. In order to study this problem, the country is roughly divided into six regions, namely, north China region — Hopei, Shantung, Shansi, and Honan; central China region - - Kiangsu, Anhui, Kiangsi, Hupei, and Hunan; southeastern coastal region - - Chekiang, Fukien, and Kwangtung; northwestern region — Chahar, Suiyuan, Shensi, Kansu, Sinkiang, and Ninghsia; southwestern region — Szechuan, Kweichow, Yunnan, and Kwangsi;

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and northeastern region (Manchuria) - - Liaoning, Kirin, Heilungkiang and Jehol. The coal output, consumption, and surplus or deficit in these regions are shown in the following table (118, p. 115): Regional Demand and Supply of Coal in China, 1933 (Metric Tons)

Region

Production Consumption

14,193,000 North China Central China 2,472,000 SE Coastal 546,000 680,000 Northwest Southwest 911,000 9,577,000 Manchuria* * Adjusted

9,377,000 7,457,000 1,166,000 587,000 962,000 5,648,000 by author.

Per Capita Consumption 0.08 0.05 0.02 0.02 0.01 0.17

Surplus Deficit (-) 4,815,000 -4,985,000 -619,000 -93,000 -51,000 3,929,000

The major interregional movements of coal in 1933 occurred in north China, central China, and Manchuria. North China, with a production of 14 to 15 million metric tons and a consumption of 9.4 million, had a surplus of 4.8 million. Of this surplus, about 80% was shipped to central China, 15% abroad, and 5% to southeastern China. Central China, producing only 2.5 million metric tons while consuming 7.5 million metric tons, had a deficit of 5 million tons. Of the deficit, 75% was supplied through shipments from north China, and 25% by imports mainly from Japan and French Indo-China. Manchuria, with a production of approximately 10 million metric tons and consumption of 5.5 million, had a 4.5 million-ton surplus, which was shipped mainly to Japan (about 80%) and central China (20%). The other regions were less important in both production and consumption. In the southeastern coastal region, the deficit of 0.6 million tons was chiefly made up from foreign imports. Evidently, the local output was not sufficient to supply the needs, besides, transportation facilities favored importation from coastal cities. The northwestern provinces possess large coal reserves, but no industrial markets to absorb the potential production. Furthermore, the general lack of railways caused the coal consumption to be localized. The same may be said for southwest China, though

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the reserves of high-grade coal are not as extensive as elsewhere. During recent pre-1937 years, both the output and consumption of coal increased in central China. Because of the increase of industrial demands, consumption increased faster than production. Normally this would have resulted in larger imports but as a result of greater demand for coal in Japan and Manchuria, plus the fact that the Chinese import tariff had been raised, this deficiency was made up by shipments from north China. Hence the flow of coal was still from the north to the south. In competing for the central China markets, the southern collieries enjoy the advantage of proximity to the markets, while northern collieries usually produced better coal at a lower cost. Any producer of high-quality low-cost coal near Shanghai and Canton, for instance, should be able to sell all he could produce unhampered by competition from northern coals. After the Sino-Japanese hostilities started in 1937, the Japanese quickly invaded and took over the principal coal areas of China Proper. Since neither Japan nor Manchuria possessed large amounts of coking coal, the best available source of supply was north China. Large quantities of Kailan coal went to Manchuria and Japan for the blast furnaces there. This led to the bombing of the colliery early in 1944. Chinghsing, Liuhokou, and Chunghsing also expanded operations to furnish the Japanese with coke. Tatung coal was exploited for boiler purposes. Central China, instead of receiving coal from north China, had to rely on increased local production (also under Japanese supervision) and imports from Indo-China to meet the current market demands. Southwestern and northwestern China were practically blockaded from the outside world, but the situation, aside from wartime development, remained essentially unchanged so far as the flow of coal was concerned. Urban Versus Rural Coal Consumption. A high concentration of coal consumption exists in the urban centers of China Proper. Six major cities, namely, Shanghai, Tientsin, Peiping, Wuhan (Hankow, Wuchang and Hanyang), Canton and Nanking, with a combined population of 2.5% of the total of China Proper, consumed an aggregate of 6 million metric tons of coal in 1933, or approximately a third of the total consumption. The remaining cities and rural regions, comprising 97.5% of the population, consumed only 12 million metric tons. There are many reasons for the difference in the per capita rate of coal consumption in rural and urban districts. The large cities are either cultural, political, or financial centers, hence the living

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standards are relatively higher. They have rail and shipping facilities to the areas of coal production which make it possible to deliver coal more cheaply, and because of closer contact with the west, these cities have a larger coal demand from modern heating installations and from industries. Furthermore, in contrast with city folk who very commonly use coal and coal balls in their pit stoves, the rural farming population generally consume wood and corn stalk in their combination cooking and "kang"-heating stoves.* What are the conditions of coal consumption and supply in these consuming centers? A table showing the per capita consumption, the percentages of uses, and the sources of supply of the cities mentioned above, is presented on the following page. Except for Peiping and Nanking, all of the cities are important centers of modern industries. The degree of industrialization can be judged from the actual and relative coal consumption. It must be taken into consideration, however, that climate is also an important factor. For example, no coal is needed for heating houses in Canton, whereas a good deal is necessary in Tientsin and Peiping. In general, the more industrialized cities, such as Shanghai, Tientsin, Wuhan, and Canton, consume between 55 and 80% of their coal for industrial purposes. The table shows that imported coal formed a considerable portion of the total supply in Shanghai and Canton, while Tientsin, Peiping, and Nanking received only negligible amounts from abroad. Shanghai and Canton are located on the coast far from any important domestic coal mine, hence rely on imports. On the other hand, Tientsin obtains its supply mainly from Kailan; Peiping mainly from Mentoukou and other Hopei Mines; Wuhan* and Nanking from domestic coal producers which have access to the two trunk railways of Peiping-Hankow and Tientsin-Pukou respectively. Between 1931 and 1936 there was a significant tendency of im* A C h ú t e s e f e r n e r u s u a l l y b u i l d s s b r i c k bed ( h a l f t h e s i z e o f t h e r o o m ) w i t h a s t o v e on one s i d e o f t h e o u t e r e d g e o f t h e b e d . D u r i n g the w i n t e r , t h e f l u e s o f t h e s t o v e c i r c u l a t e t h r o u g h p a s s a g e s c o n s t r u c t e d under the bed b e f o r e e s c a p i n g ; but in the summer, t h e f l u e s l e a v e the s t o v e d i r e c t l y f r o m an a l t e r n a t e chimney. #*uhan g e t s shut down.

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1 94

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The chart on the following page shows the total imports and exports of China f r o m 1870 to 1940. The coal trade of China P r o p e r after 1931 can be found in the Chinese Customs Reports; while that of Manchuria in Foreign Minerals Survey, U. S. Bureau of Mines, October, 1945, p. 82. Effect of Trade on the Chinese Coal Industry. For many years China felt the competition of Japanese and Fushun coal in south and central China. Japanese coal f r o m Kyushu and Hokkaido was mined no cheaper than the average Chinese coals, but Fushun coal was far cheaper. Hence, the pressure f r o m Fushun was due primarily to its advantages in low production and competitive transportation costs. While the threat f r o m Japanese coal arose not so much from differentials in cost as f r o m the effects of the price maintenance policy of strong Japanese financial interests. The Japanese coal industry was highly centralized. Two of the largest interests, Mitsui and Mitsibishi, controlled half of the Japanese output; and, together with six other large concerns, they controlled 80% of the Japanese production. T o maintain domestic prices, they often flooded the Chinese markets with coal, notably at Shanghai. Competition of Japanese coal was especially serious during 1931 and 1932 when the Japanese industry was in a depressed state. Many Chinese coal producers, especially the newly established ones in central China, naturally found it very difficult to operate in such an unstable market. Between 1932 and 1937, as a result of the higher Japanese consumption, and of the higher import duties (3.54 yuan per ton on bituminous coal in 1934) on coal levied by China, foreign imports in general, and Japanese imports in particular, had declined. This, together with the general improvement of transportation facilities in China, permitted the collieries in south and central China to expand. The Huainan Company established a reputation during this period, and probably can compete favorably with Japanese coal for the central China markets even in the post-war era. French Indo-China relied on China f o r an export market. Out of her two million tons of production usually about 20 to 30% came to China. In 1940, Indo-China furnished over 600,000 metric tons, or 95% of the anthracite shipped into China. Though such large imports were not necessarily favorable to the Chinese coal industry, IndoChinese anthracite relieved certain markets during emergencies when domestic coal was not adequate. This anthracite competed with that of Chungfu, and several small mines near Chinwangtao, f o r the Shanghai market. In the future, it will probably also com-

w

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pete with Shansi coal. Chinese anthracite may eventually replace Indo-China coal in Shanghai, but not necessarily in Canton, because of the relative distances involved. The Chinese import tariff has had a profound effect on the IndoChinese coal imports, and thereby affected the anthracite production of China. The tariff on anthracite was raised from 1.64 yuan per metric ton in 1933 to 5.50 yuan in 1934. In consequence, coal imports from Indo-China declined to the point where, instead of representing the usual 50% of Shanghai's anthracite, they made up only 25% in 1934. The market for Indo-Chinese coal was suddenly disappearing, but in May, 1935, China and France made an agreement to reduce the import tariff on coal to the 1933 level. In return, certain Chinese articles exported from Yunnan, Kwangsi, and Kwangtung came under the minimum tariff regulations upon their importation into French Indo-China. The immediate result was the return of imports in 1936 to the 1933 level. It can be argued in defense of import tariffs that they should be adequate for the protection of domestic producers, especially in the initial stages of coal mine development. They must not be so high, however, as to stop the flow of cheap foreign coal, at the same time keeping inefficient domestic coal mines in operation. Aside from the tariff changes, the domestic output is affected by the production and transportation costs. If Chinese coal can be delivered to domestic markets cheaper than imported coal, naturally less coal would be imported. The aim of promoting exports and curbing imports of coal is beneficial to China's foreign trade and will stimulate domestic coal production; both are essential to China's industrialization. The volume of foreign coal trade by countries is illustrated by the table shown on the following page (137). Foreign Coal Trade by Ports. Foreign coal trade is naturally limited to the coastal ports which have access to shipping. The one exception is in Yunnan, where Haiphong coal from Indo-China was shipped to Kunming by railway. Generally speaking, the ports in north China predominantly handled exports; those in south China, imports; and those in central China, both exports and imports. Although Chinwangtao (see 3 pages later) rivals Dairen in the total amount of coal shipped, it only ships one-third of the tonnage to foreign countries. Dairen, on the other hand, ships most of its coal to Japan, the amount distributed to other Chinese ports being comparatively small. Dairen handles more than half of the coal exports of Manchuria, or over two million tons annually; it also

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China P r o p e r ' s Coal Trade by Countries (Metric Tons) Exports: Japan Hongkong Korea Germany Manchuria Other Countries Total

1933 392,300 83,200 48,200 11,300 8,800 38,800 582,500

1934 569,300 47,700 138,900 16,000 8,600 31,500 812,000

1935 625,000 70,700 49,700 32,300 25,100 74,200 877,100

1936 1,047,100 154,600 84,800 21,200 35,800 31,400 1,374,900

Imports: Japan Manchuria. Indo-China India Dutch E. Indies Formosa Other Countries Total

520,600 462,100 481.8Q0 167,300 117,600 61,100 168,100 1,978,700

284,900 230,500 269,400 63,300 71,700 36,700 81,900 1,038,400

176,500 154,700 245,400 49,900 75,500 49,600 22,700 744,400

95,200 87,900 301,600 8,300 28,400 24,700 14,600 560,700

distributes over a million tons of bunker coal. Antung- and Yingkow also export coal, but they are overshadowed by Dairen. Recently, Tumen, which borders Vladivostock, has become Manchuria's second port, though still exporting less than one-fifth that of Dairen. P r i o r to 1931, Fuchou located north of Dairen, also shipped some coal to Shanghai, Chefoo, and Weihaiwel. As this constituted interport coal movement in China it cannot be considered as exports. There is still another outlet for Manchurian coal, the railway which passes through Antung and western Korea, unfortunately the actual amount thus shipped to Japan is not known. Chinwangtao, the harbor of the Kailan Administration, has no equal in north China. In 1936, nearly a million tons of coal was exported, mainly to Japan but also to Hongkong, Korea, and the Philippine Islands. Tsingtao, from where the coal of the Sino-Japanese Luta Company is exported, is next in importance. In 1936, about 0.3 million tons were shipped to foreign countries from there. Nanking has emerged during recent pre-war years as an important port of coal export, as a result of the development of Huainan, the expansion of Chunghsing, and the fact that Nanking developed better facilities for shipping since its establishment as the capital of China. Shanghai, Tientsin, and Hankow are next in the coal export trade.

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Shanghai heads the field in coal imports. In the past, its annual consumption of over three million tons was not wholly furnished by domestic production; imports of foreign coal, chiefly from Japan, Manchuria and Indo-China, amounted to 1.2 million tons in 1933, though decreasing to 0.3 million tons in 1936. About half of the tonnage of foreign ships coming to China stopped at Shanghai; they required bunker coal, and at times loaded some coal on the "return cargo " Thus coal is both exported and imported at Shanghai. Canton and Kowloon combined were next in importance, normally importing about one-third to one-half of the Shanghai quota. The low-cost high-grade coals from north China were not cheaply available in sufficient quantities to this coal-scarce area. In fact, no coal could come south by the overland route before the CantonHankow Railway was completed. Even after its completion, excessive freight charges still prevented some northern coals to successfully compete with coal from Indo-China in this market. Perhaps in the future this situation can be partly remedied by lower freight rates on state-owned railways. The decline of imports here must be attributed to the development of several small coal mines in northern Kwangtung, notably Fukuo Mine. Swatao and Chefoo are the other main ports which import coal from abroad. Hongkong, which imports over half a million tons chiefly from Dutch East Indies and India prior to Pearl Harbor, is technically still a British port. In general, future imports in China's southeastern ports from countries other than Indo-China should greatly decline. One important reason is that Formosa,* which produces more coal than it needs, is now a part of China. The table on the following page shows the exports and imports at various cities during normal pre-war years (137). Of special interest are the exportation and bunkering facilities of Kailan Administration (138). At Chinwangtao Kailan has its own port, reported to represent an investment of over twenty million yuan. Seven ships of various sizes can be anchored there at the same time. Vessels with a draft of 26 feet can lie along the principal breakwater berths at any state of the tide all year round. It has the storage facilities for 200,000 tons of coal, and can load a total of over 12,000 tons per day. This is admittedly not very much by US standards, but it is the largest in China Proper. *Annual output of Formoe« i a now about 2 . S m i l l i o n

tone.

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China Proper's Coal Trade by Ports (Metric Tons) Ports of Shipment: Chinwangtao Tsingtao Shanghai Tientsin Nanking Others Total Ports of Entry: Shanghai Canton Swatao Lungkow Chefoo Kowloon Others Total

1933

1934

1935

456,500 64,400 36,500 24,500 1,700 582,500

690,800 74,300 20,500 12,900 13,100 300 812,000

639,000 86,900 81,400 26,100 39,200 4,300 877,100

887,100 227,000 27,000 54,300 113,400 15,800 1,374,900

1,219,000 271,600 65,200 20,000 61,400 74,500 267,100 1,978,700

607,800 137,700 42,300 42,100 42,000 30,400 136,100 1,038,400

381,400 138,000 37,900 36,300 38,700 18,800 123,200 774,400

289,900 82,600 41,200 28,700 24,800 10,000 83,500 560,700

1936

Kailan maintains a fleet of medium-sized boats to provide transportation to its various markets, and also sells coal directly to foreign shipping concerns for export. Besides, it bunkers coal for any ship which calls at the port. Hitherto, British ships had priority for bunkering because of the powerful British interests in Kailan; next were Japanese ships, and finally Chinese. Loading of coal at Chinwangtao is done by hand. A record, 8000 tons of cargo and bunker coal, was loaded on the s / s "Ingerin" in one day. At Shanghai, bunker coal could either be loaded at the Kailan wharf at Pootung (30 feet draft) or in the stream nearby. About 1800 tons per day could be loaded at the former, and 800 tons in the latter. Because of the expansion of Kailan's business at Shanghai, a mechanical handling plant has been built at the ZaWhei-Kong wharf which is capable of screening and discharging coal at the rate of 300 tons per hour. The Kailan agent at Hongkong is Dodwell & Co. Ltd., but it has a wharf at Laochikok (26 feet draft) where 1400 tons can be loaded by hand per day. There are various other agencies handling Kailan coal at the smaller ports, but those mentioned are the most important.

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COMPETITIVE POSITION OF CHINESE COAL IN WORLD MARKETS

Natural Factors in Competing for Foreign Markets. The possession of a particular kind of coal is often equivalent to a complete or semi-monopoly based on natural conditions. How f a r these monopolistic powers can be exercised effectively depend upon the range within which the several kinds and grade of coal can be substituted for each other, as well as by the range within which coal can be displaced by competitive power sources. Details have been discussed in the chapter on marketing. Unit Production Costs. In China, the cost of production of coal ranged from 2 to 8 yuan per ton during 1934, average 4.8 yuan (140). Generally speaking, the natural difficulties in mining are not excessive; the costs of machinery and materials are low f o r primitive mines though relatively higher f o r modernized mines; overall labor costs (but not unit labor costs) are naturally high in mines with no modern equipment, and comparatively lower in those which have; and the administrative and selling costs are not out of the ordinary. The average cost of production is not significant in itself, but will serve as a basis for comparison with other coals of the world. The B.T.U. costs would be more accurate but it is difficult to determine the various heating values, while the average f o r a country does not necessarily represent the individual coal areas. Some generalizations are made to convert low B.T.U. lignite into equivalent coal units. Despite the fluctuations of exchange rates, production costs can be compared in terms of US dollars per metric ton during relatively normal years. France is the only country which devaluated its currency radically. Generally speaking, production costs are higher in Europe than in the United States and Asia, but those in Europe have dropped in recent pre-war years. Japan and China are about the same. Since Europe, America, and Asia are three widely separated spheres, the disparity in production costs is not sufficient to permit the natural flow of coal from one area to another, because transportation costs are so large in comparison to production. The production costs of competing coals in the Far East will be discussed here, leaving the factor of accessibility to ports until later. In China, the most famous non-coking bituminous coal comes f r o m the Fushun mine which boasts the lowest production costs in the Far East, averaging about 1.5 yuan per metric ton. Next in importance is Kailan, noted for its bunker and general steam-

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Comparative Production Costs of Coal* Country

Currency/Met. Ton

US$/Met. Ton

Year

2.69 1936 13s 5-l/2d Great Britain 2.34 Poland 12.38 Zloty 1936 4.81 74.40 Francs 1935 France 1.97 1936 U.S.(f.o.b.mines) 1.97 US$ 4.19 1936 Germany(f.o.b. mines) 10.41 Marks 1.45 Japan( estimated) 5.0 Yen 1936 1934 China 4.8 Yuan 1.63# 1.53 1938 Indo - C hina( exp. value) 53 Francs 3.54 Dutch East Indies 6.69 Gilders 1939 (export value) •European figures are from The World Coal Mining Industry-I, Geneva, 1938; the US figures from Minerals Yearbook, 1937, p. 794 (converted to metric ton). Export values per metric ton for 1936 were as follows: United States, US$4.00; Great Britain, US$3.34; Germany, US$3.77; and Poland, US$2.94. Export value for France was about US$3.20 per metric ton for 1938 after the devaluation of the franc. Export value for China was about US$2.75 per metric ton during normal years. #If calculated from the 1936 rate of exchange the average production costs for Chinese coal would be US$1.43 per metric ton. raising coal, but which has a large potential market in coking coal. Its production costs average about 3.50 yuan per metric ton. Chunghsing and Luta also have possibilités with production costs at about 5.0 yuan per metric ton. Shansi coal is produced at relatively low costs, 2.5 yuan per metric ton, hence, can possibly be exported if transportation costs could be reduced. Huainan coal is not produced at excessive costs, but probably, like other low-reserve coals in south-central China, will confine itself to markets in domestic areas. In Japan, the Chikuha field in northeastern Kyushu, and the Kushiro field of eastern Hokkaido produce coal at 4.5 yen and 5.5 yen per metric ton respectively. These deposits are only fair-quality bituminous non-coking coals. In Korea, the Heijo anthracite deposits presumably produce coal at approximately 5.0 yen per metric ton. Good steamship coal is mined in north Formosa and is exportable to Japan and central China. The production costs of anthracite at Haiphong, Indo-China, must

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be sufficiently low to permit exportation to China in spite of the Chinese tariffs. The devaluation of the franc, to less than half its former value, further enhances its position. Indian coal (highgrade bituminous coal and some coke) from Bihar and Orissa, west of Calcutta, has also been able to compete in the Far East. Another source of competition is the Dutch East Indies' friable coal from Sumatra and Borneo, where production costs are not excessive. Easy Access to Consuming Markets. The coal fields of parts of Great Britain, especially those of Wales, are situated to the best possible advantage for export trade. The average length of haul, for British coal f o r export is no more than 25 miles. This compares favorably with 50 miles in the case of Belgium, 35-70 miles in France, 100-150 miles in the case of the Ruhr, and about 300 miles in the case of Polish Upper Silesia. The natural advantages of the British industry are such that under conditions of free competition, it can land coal on the German North Sea coast or the American North Atlantic ports more cheaply than it can be supplied in those places from the German or American mines (139). The natural advantages of the British coal fields for the export trade should not, however, be exaggerated. Thanks to a highly developed interlacing of canals and rivers with the railway network, coal from the Ruhr district can be laid down at ports in Germany (i.e. Emden) or Belgium (i.e. Antwerp) for nearly the same transport costs as British coal at Newcastle or Cardiff. In Poland, the disadvantages in distance to ports is diminished by very favorable railway charges (141). In the United States, the great cost of bringing coal to tidewater f o r export is due to the length of haul. Still, US coal has access by rail to Canadian markets, such as Ontario, despite preferential freight rates given to Alberta and Nova Scotia coals. The distance of shipping by boat or barge is naturally another important factor in discussing access to markets, but water rates are typically lower than rail transport. It is the rehandling of coal which jacks up the transportation costs. Fushun is 200 miles from Dairen and 150 miles from Antung. Peipiao and Fuhsin coals are less than 100 miles from Hulutao, but the harbor facilities there are still inadequate. Kailan coal is less than 100 miles from Chinwangtao, where harbor facilities are good. Chunghsing is within 150 miles from Haichow, another undeveloped port; and Luta about 125 miles from Tsingtao. Even T a tung's coal is not more than 300 miles from Tientsin, but the present distance by rail is about 400 miles. The distances to ports are

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not excessive, hence if shipping facilities were available, Chinese coal is accessible to foreign markets, such as Japan, Korea, and the Philippines. Competing with China will be the Miike coal located on the west coast of Kyushu only 500 miles from Shanghai. The Kushiro mines at Hokkaido, being 500 miles north of Kyushu, is therefore less favorably located. In the post-war era, with Japanese shipping cutto a minimum, and the fact that Japanese reserves are low in the first place, little coal will be available for export, except in the first few years while Japan's industries are getting re-established. The Indian coals are between 100-200 miles from Calcutta. In Sumatra, the Ombilin field is near Padang and the Beotik Assem field is only 80 miles from the port of Palembang. East Borneo coal is of low-grade but has access to the Philippine markets. That Sumatra ánd India can supply Singapore with coal is understandable; but transportation costs must be very low if these coals are to compete with domestic coals in the China market, the demands created here by wartime emergencies during pre-Pearl Harbor days will probably not exist in the future. Policies Affecting Competitive Relations. The competitive advantages and disadvantages resulting from natural factors are not allowed free play to shape the structure of the world's coal markets. Within the last 15 years, almost all governments have been applying special measures to regulate competition in the home market, to swing the balance of competition abroad in favor of their own nationals, and to enter into preferential trading arrangements as exporters or importers of coal. Protective Customs Duties. Customs duties are imposed for protective purposes, for revenue purposes, or for both. For every country, there is first the question of deciding which of several levels of duty is capable of yielding the largest gross sum of revenue to the national treasury; and secondly, the question of deciding whether any given level of duty is capable of effectively sheltering the national collieries against foreign competitors. Since the 1929 depression, nearly all countries, including China, have some kind of protective tariff. The development of several mines in central China should at least be partly attributed to such tariffs. Post-war China will need some form of protection to re-establish and expand its coal industry. Quota Limitation. Also a result of the depression, systems of limiting the total volume of imports of coal and its products by quotas are now in force in important coal-consuming countries,

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most of which are also large producers of coal. Where quota systems have been put into effect, they have usually aimed at the protection of national collieries against foreign competition, or to preserve exchange. China has not had quota limitations on coal. It may be wise to limit Indo-China anthracite into Shanghai, while giving exemption to the Canton market. Commercial Organizations. The nature and functioning of the devices by which coal mining is commercially organized in individual countries need not be discussed here at length. (See Chapter IX) Suffice it is to say that countries like Germany, Belgium, France, and Poland have elaborate schemes for regulating the output, allotments of export sales, official control of prices, and preferential zoning of the home markets, which have in one way or another proven worthwhile. China has no such commerical organizations, the establishment of proper ones should facilitate the development of the coal industry. Export Subsidies. Direct or indirect subsidies in aid of coal exports are widely employed; by means of such subsidies, the countries which struggle for world markets seek to gain marketing advantages for their national producers or to relieve them from m a r keting disadvantages. Whether direct or indirect, governmental or quasi-official, the practice of allowing subsidies to the coal export trade assumes a great variety of forms, of which four general types may be usefully distinguished. Export shipments may be aided by special bonuses or premium payments, in which event the necessary sums are usually raised by levies upon the output of coal, coke, briquettes and the like, or upon the tonnage consumed by the home markets. Freight charge schedules, usually those on state railways, may be adjusted so as to encourage export shipments, discourage import shipments, or both. Collieries may be granted special facilities in the way of reliéf from tax burdens, particularly with regard to export shipments of coal. The coal trade may be organized commercially so as to facilitate exports at lower prices than prevail for the same kinds and grades of coal in the home market. Of course, all these forms of subsidies mean that the nationals of a country have to pay for them. But on the other hand, the increased production would mean decreased costs and more employment which would in the long run compensate for the subsidies. China does have preferential freight rates for exports, but no other form of subsidies. It is here advocated that aside from indirect state railway subsidies, some form of direct colliery subsidy be

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given so that Chinese coal can compete favorably in the export markets. Preferential Trade Agreements. Perhaps the outstanding commercial characteristic of the period since 1929 has been the tendency to replace multilateral by bilateral trading, especially in the coal commerce of Europe. In the practical realization of this tendency, coal and its products have shared as much as, if not more than, any other staple commodity of world trade. Today coal markets are, as a whole, characterized by a network of preferential trade arrangements and barter agreements. Britain, the largest coal export country in the world, made preferential agreements in 1933 and 1934 with the Scandanavian and Baltic countries whereby about 70% of the coal imports of these countries would come from Britain. It made a coal-livestock agreement with Ireland in 1935; and has had tariff preferences in Canada since 1932 (139, pp. 188-9). Germany and Poland have similar agreements with coal-consuming countries. China does not have such preferential trade agreement involving coal. What arrangement with future coal-buying countries is advantageous will be discussed later. Rate of Exchange. Cost-price factors in the international coal trade have been modified since 1931 by means of devaluation, depreciation, and exchange control. Great Britain first enjoyed a stimulus of coal trade in Europe from the devaluation of the pound sterling in 1931-1932, but soon the corresponding prices fell in other countries and the result was a general devaluation of nearly all currencies. The United States went off the gold standard in 1933, and France devalued its currency in 1936. Germany and Japan theoretically maintained the normal gold value, but they too achieved advantages similar to the currency devaluation in other countries by controlling foreign exchange. In brief, insofar as international competition in the coal markets is concerned, the gain and losses seem to have cancelled out. The post-war rate of exchange between Chinese and foreign currencies will have a direct effect on the general foreign trade of China, including coal. At the present, the exchange rate is complicated by unprecedented inflation in China, a matter too complex to try to discuss. The immediate advantage gained by Indo-Chinese coal will probably be gradually offset by counter measures. Through the efforts of the Bretton Woods Monetary Conference, world trade should gradually return to natural competitive channels. What the actual rates would be in the Far East should be of great concern to the coal exporters of China.

206

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POST-WAR

COAL

OF

MARKETS

Japan. Due to the proximity and the interdependence of certain goods, China and Japan are expected to carry on a large volume of trade in the post-war era. The character of this trade would necessarily be modified by China's determination to develop her own natural resources, and to compete with Japan for certain f o r eign markets. The volume of trade, however, is expected to exceed one billion yuan annually. Regarding imports, China (including Manchuria) should in the long run discourage the importation of cotton, woolen and rayon tissues, and other semi-fabricated textile goods from Japan (which amounted to well over 100 million yen during normal times) because it is essential for China's economy to develop such industries. On the other hand, before China can produce certain machines, vehicles, instruments, and iron and steel manufactures, she should continue to import some varieties from Japan since the higher-quality US products may be relatively too expensive. Surplus raw cotton, wool, soy beans, tin, tungsten and coal can be exported to Japan in exchange for these imports. In the past, coal exports have occupied an important position in the Sino-Japanese trade, averaging over 50 million yuan annually or nearly 5 million tons. Since the coal reserves of Japan are l e s s than one-twentieth those of China, and good coking coal is lacking there, Japan should be in a position to import some coal from China in the future. The industrial demands of Japan would naturally depend upon the amount of wartime destruction and upon the extent of industrial activity permitted there. The cost of production of coal in Japan is higher than that of the exportable coal from Manchuria, an obvious disadvantage to Japan; and with the loss of her wartime empire, which formerly supplied her with nearly 15 million tons of coal annually, Japan will probably need foreign coal when her industries are re-established. China with Manchuria would be competing with Korea, Formosa (now returned to China), and Indo-China for the Japanese market. Since Korea can consume her own coal, and Indo-China is less favorably located, it is likely that China will supply the bulk of Japanese coal imports. China can arrange a preferential agreement with Japan regarding tariffs or import quota, so as to facilitate exports to that country. Philippine Islands. While coal has been found in many provinces in the Philippines, and is present in mineable thicknesses, its grade is generally low (chiefly Oligocent lignite), and the r e s e r v e s have

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so far proven very disappointing. The most recent estimate on its r e s e r v e s amount to only 8 million tons of mineable coal (142). The production in 1941 was under 100,000 metric tons, and 300,000 tons were imported (of which half came from the Dutch East Indies and some from Australia) to supplement the market demands. It is almost certain that the Philippine Islands lack sufficient coal (and hence coke as well) to develop their rich iron ore deposits at Surigao, eastern Mindanao (143), and those in the eastern Cordill e r a of Luzon. The industrial power load can, to a certain extent, be substituted by some available water power and by imports of diesel and fuel oils from Dutch East Indies.* But even so the power r e s o u r c e s of the Philippines are far from large, and, with reconversion and progressive industrialization, coal demands there will probably rapidly increase in the post-war era; China should share in this coal market. Aside from coal, China should find a ready market in textile products and foodstuff. Regarding imports from the Philippines, China can use sugar, iron ore, and chromium when her future steel industry is developed (stainless steel for instance). If coal were available to the Philippines, that country could also create an iron and steel industry of her own instead of exporting all her iron ore to Japan. By stepping up iron ore mining, the Philippino economy would still have a surplus (say, one million tons annually over her own needs) which could be shipped to China. Some kind of barter arrangement involving Philippine iron ore for Chinese coal would be beneficial to both countries, and the return cargo would tend to minimize freight charges. Even under natural conditions, Chinese coal from Kailan, Fushun, Chunghsing and Formosa can compete favorably in the Philippine market with coal from the Dutch East Indies and Indo-China. Netherland East Indies. The Netherland East Indies is an important exporter of rubber, oil, and sugar. The first two would undoubtedly find welcoming markets in China. Even in pre-war years, export of gasoline to China was substantial. China can export cotton and silk goods in the future, and possibly certain foodstuffs in r e turn. Whether China can export coal to this country or not depends, in part, upon the coal supplies and demands there. There are three coal fields in the Dutch East Indies. The govern• The P h i l i p p i n e #In Japan.

1941,

I s l a n d s does not p o s s e s s

the P h i l i p p i n e s

reported

about

much p e t r o l e u m 1.2 million

either.

tons of

iron

ore

to

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ment-owned Ombilin coal field near Padang on the west coast of Sumatra has a r e s e r v e of 2.00 million tons of friable, low B.T.U. coal. The government-owned Boekit Assem coal field near Palembang in south Sumatra produces coal ranking from lignite to anthracite. Six privately-owned collieries on the east coast of Borneo produce high-moisture low-calorific value coal (144). In 1939, the total production was 1.78 million metric of coal; about equally distributed among the three areas. The Boekit Assem coal field increased its production to 0.9 million tons in 1941. Because of the warm climate, the abundance of petroleum, and the absence of large industrial plants, the Dutch East Indies required little coal and have imported only small amounts. On the other hand, they have expanded their export markets in Hongkong, the Philippines, and Singapore, sending out about 0.7 million tons, valued at 1.85 million US dollars, in 1940. The consumption of coal there is estimated at 1.5 million tons during pre-war years. There is no coking coal of usable quality in the Dutch East Indies; hence it is difficult to start an iron and steel industry. Important lateritic iron ores are known in central Celebes, the region of Strait Laut, and northeastern Borneo. The total potential iron ores are estimated at over one billion tons. These ores are high in moisture, but are otherwise of good-grade (145) (144). Should China attempt to supply the coke f o r future iron and steel plants in this area, she would have no competitive advantages as compared with India, except that Indian coking coal is limited. Still, the general coal demand in the Dutch East Indies is expected to increase, especially in view of the large areas which are not yet developed, and the absence of industries to date. If this country, fully as large as Manchuria, should one day be industrialized, her coal reserves would not be sufficient in quantity and quality for any ambitious program of development, despite the large supplemental oil r e s e r v e s . Furthermore, many of the large islands are poorly supplied with inland transportation facilities, but have good harbors and will probably depend increasingly on external supplies for domestic and industrial fuel. However, the petroleum supplies are still v e r y great and other fuels are not yet in great demand. For the present, theref o r e , and at least in the near future, it is a mistake to assume that the possibilities for coal shipments to this area are very encouraging. Malaya, Siam, and Indo-China. Rubber, tin, and Singapore describe British Malaya. China does not need tin, but can use rubber. Furthermore, in 1939 the states of Kelantan, Trengganu and Johore

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yielded nearly two million tons oí iron ore, averaging 60% metallic iron (143, p. 524). Nearly all of this went to Japan. It may be possible for China to a r r a n g e to import this iron ore in the future, though the r e s e r v e s a r e not too extensive. In return China can export textiles, other cheap manufactured goods, and coal to Malaya. The only local coal, a black lignite, is poor and very limited in quantity. The tin industry, railways, ships, and urban heating can absorb some good coal. Of course, Chinese coal would have to compete with the low-grade Dutch East Indies coal (exports about 200,000 tons to Malaya annually), Indo-Chinese and Indian coal. P e r h a p s a b a r t e r agreement of coal for iron ore could be made between China and Malaya. Siam or Thailand p o s s e s s e s no petroleum, and only a small amount of lignite. This scarcity of fuel is a major obstacle to her industrialization. China should find a small market for coal and a substantial market for cheap manufactured goods in this country. China does not need Siamese tin, but can import rubber and small amounts of rice. Indo-China would probably be more of a competitor to China r a t h e r than a market for Chinese coal. In 1938, her anthracite production amounted to 2.3 million metric tons (146). She has m o d e r ate amounts of all the basic raw m a t e r i a l s for heavy and light industries. The r e s e r v e s of coal in Indo-China have been estimated at twenty billion tons (147). This coal is a friable anthracite of Mesozoic age and is marketed as raw coal and briquettes. The Hongay coal is mined in a great open pit. The French a r e interested in developing the raw m a t e r i a l s for export r a t h e r than for industrialization. Therefore, it should be possible for an industrialized China to export f r o m Canton to Indo-China cheap consumer goods in exchange for rubber, iron, and chromium. But should Indo-China ever become industrialized, she would certainly need coking coal which is generally lacking there; such potential demands can possibly be met by China.

CHAPTER

XII

POLICIES OF POST-WAR INDUSTRIAL DEVELOPMENT TREND

TOWARDS

GOVERNMENT

CONTROL

F i r s t Attempts of Nationalization. The industrial development of any country can be accomplished by private initiative or by overall planning. Most of China's industries had been established by p r i vate enterprise; but the republican government has been i n c r e a s ingly active in this field, especially since the Manchurian Incident. The main impulse toward planned development of Chinese indust r i e s dates back to the end of the f i r s t world war when Dr. Sun YatSen completed a comprehensive plan covering nearly every phase of economic life (148a). But even his program provided encouragement to private enterprise whenever possible, though the accent wás on state-controlled industrialization. P r i o r to 1931, many of the Chinese railroads were state-owned and more were subsequently built by the Government. The National Defense Planning Committee was established in 1932 to investigate the natural r e s o u r c e s of China and to formulate policies pertaining to national defense. In a subsequent reorganization, it was renamed the National Resources Commission and placed under the National Military Council. Thus the Government began to participate actively in the field of industry and mining. The s u c c e s s of the development of the Huainan coal mines in Anhui by the Government foreshadows more state enterprises of this kind. In August, 1936, the National R e s o u r c e s Commission announced a t h r e e - y e a r plan for the general development of industries producing motors, e l e c t r i c a l equipment, tools and machinery. In addition, plants were to be built to produce increased quantitites of coal,

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metals, gasoline, chemicals, etc. (148). The funds were to be supplied by government and foreign sources. This type of increased government activity had been forecast by Chiang Kai-Shek when, in 1937, he stated that China must develop "state capital" for the conduct of "independent enterprises and those which private capital cannot handle, and for large scale projects related to our national economic program." He also emphasized the need of protecting private business for securing maximum production (149). More Active Government Participation During the War. In 1938, the National Resources Commission, which handles state-owned enterprises, was formally incorporated into the Ministry of Economic Affairs. The functions of the Commission are: To develop, operate, and control basic industries, important mining enterprises, and electric power enterprises; and to administer other enterprises as designated by the Government (150). This policy of state-domination was accentuated during the war through defense requirements, e s pecially in the Southwest and Northwest which at the outset were nearly devoid of industrialization. By 1942, the number of large government plants had risen to 98, which represented a six-fold increase from the 16 existing before the war (150, p. 434). At the same time, however, private enterprise was promoted and facilitated by another government organ under the Ministry of Economic Affairs called the Industrial and Mining Adjustment Administration. Assistance in the form of low-interest loans, free land, cheap transportation, guaranteed profits and the like, gave impetus to rapid industrial expansion before inflation set in. Though most of the smaller industries were still privately-owned, the trend toward a national plan of economic development was unmistakable. The coal industry was no exception. In fact, during the war. the National Resources Commission exploited 23 coal mines in F r e e China. By 1942, the production of these was about 17 times the base year of 1937 (150, pp. 482-3). But direct state-control could be extended only to the larger coal mines, like Tienfu, Paoyuan and Chiayang, leaving the bulk of the production to primitive mines scattered within the area. The inability of "state-control" to deal with small and scattered industries contributed to the formation of the Chinese Industrial Cooperatives. These organizations, and their larger federations, were based upon the cooperative effort of seven or more skilled workers per unit. Supported and partly financed by the Government, and stimulated by the personal desire of the members to make the "business" successful, the industrial cooperatives were able to expand

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rapidly during the war. They not only produced and marketed essential military and consumer goods, but provided livelihood and promoted educational and social welfare among their many members. If only from the standpoint of seeding small industries in the rural communities, the industrial cooperatives would merit special encouragement in the future. Their importance, however, is overshadowed by the necessary development of large-scale industries under an overall government plan. Overall Planning of Post-war Industrial Development. To develop China completely by private enterprise would not only require too much time, but due to the scarcity of domestic industrial capital, any large-scale penetration of foreign interests, if uncontrolled, might create a pattern of development unfavorable to China's economy. Furthermore, the evils of capitalism should not be accentuated in China since the contrast between the rich and the poor is already great. On the other hand, a rigid state plan like that of the USSR, whereby the manufacture of consumer goods was ruthlessly postponed in favor of the development of basic industries, is also not appealing. A further reduction in the national standard of living for the modernization of China's economy would mean starvation for the people. Besides, compared with Russia, China lacks the mineral wealth and does not even possess the initial tools required for industrialization (151). Nevertheless, the Government realizes that some kind of planned economy, aimed at striking a happy medium between individualistic capitalism and proletarian communism, is essential to China's development. It must also be able to attract foreign capital. The latest proposal concerning the sphere of government control over industry was voiced by Generalissimo Chiang Kai-Shek to Mr. Hugh Bailie, President of the United Press on October 17, 1945. He said that the Chinese Government will reserve for itself important railroads, large hydraulic power plants, large iron works, and wire communications, while other enterprises will be privately operated (152). This statement was probably based upon the resolution adopted by the Supreme National Defense Council in Chungking on December 28, 1944 (153). Among the highlights of the resolution which pertain to overall planning, the following stand out: (1) The kinds of state monopolies should not be too numerous (in addition to those mentioned by Chiang, arsenals and mints are included). (2) The Government may, on its own account or in cooperation with Chinese or foreign capital, engage in enterprises which private capital is not fully capable of developing or which the Government regards as

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being of special importance, such as large-scale petroleum fields, air and water transportation. (3) The establishment of any important enterprise should, according to law, be submitted to the examination and approval of the Government to determine how it fits into the general plan for economic reconstruction. (4) To all private enterprises that conform to the general plan for economic r e construction the Government should give special encouragement, including financial aid and technical and transportation facilities, so that they may achieve their scheduled programs. Although the sphere of government participation and control is still not very clear, it appears that several of the basic industries previously mentioned will be completely state-dominated in the post-war era. Others, such as the coal industry, will probably see increased government participation with the idea of supplementing and facilitating private enterprise rather than competing with it. However, most of the light industries, and consumer goods industry in particular, will probably be predominantly in private hands. This means that, under a comprehensive government plan, there will be room for both state and private enterprise. However, under such an arrangement, it must be noted that, f i r s t of all, efficient government management is absolutely essential. To put old-fashioned officials of no technical background, and little administrative ability into important posts for directing industrialization could only mean disaster. In the past 50 years even many graduates of foreign educational institutions have been assigned to posts without regard to what they have studied. Secondly, in industries where both government and private enterprise co-exist, state-enterprises should refrain from encroachment upon private concerns with the aid of their government-backing because this would kill all private incentive. Thirdly, the government banks should make longerterm, lower-interest loans available to private industries, especially in view of probably greater foreign investments in the future. Fourthly, expanding government railroads should extend their full facilities not only to state-industries, but to private industries as well. If the Government intends to carry out its program of efficiently developing state enterprises while "giving special encouragement" to private enterprises, then China can look forward to rapid industrialization under peaceful conditions. Dr. Wong Wen-hao in 1942 suggested a ten-year program for the post-war development of China. His proposals were later formulated by the (American) Foreign Economic Administration into a comprehensive plan, not yet published. In broad terms, Dr. Wong's plan in-

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eluded the total production of 14 million tons of steel, 500 million tons of coal, 3.36 million tons of steel rails, 2,400 locomotives, and 3 million tons of steam ships in ten years (154). It was admitted that China cannot accomplish such a goal without foreign technical and financial aid. Fortunately, as will be shown later, the policy of the present Chinese Government is aimed at making foreign participation worthwhile; and with the adoption of a new constitution in China, even more liberalism can be expected. Q U E S T I O N OF FOREIGN

PARTICIPATION

Lack of Industrial Capital and Technicians in China. In o r d e r to show the need of foreign participation, it is only necessary to point out how little China has with respect to money and technicians. B e f o r e the war, the total modern industrial capital of China P r o p e r amounted to only 3,807 million Chinese dollars or approximately US $1,300,000,000 at the pre-war rate of exchange (155). Of this only one quarter was owned by Chinese nationals. The f i v e billion yen invested by the Japanese in Manchuria up until 1941 also r e p r e sented foreign interests (151). Fortunately, China should r e c o v e r most of the latter as war reparations. Lately, however, the situation is complicated by the Russians, who have stripped the Manchurian industries. Even with Manchurian investments, Chinese industrial capital per person is probably less than one percent that of the United States. The low level of average income in China, so little exceeding a minimum living standard, prohibits the accumulation of surpluses f o r investment purposes. This prevailing situation of poverty has been accentuated by recurrent wars. T o launch China on even a moderate program of industrialization, probably f r o m f i v e to ten billion dollars are needed f o r capital goods alone. It is t h e r e f o r e obvious that China must depend on foreign capital f o r any l a r g e scale industrial development in the near future. There is also the distinct lack of technical men required f o r industrialization. According to the National Resources Commission, which was also considering a f i v e - y e a r plan separate f r o m D r . Wong's ten-year program previously mentioned, an estimated 30 ,000 engineers and 800,000 skilled w o r k e r s will be needed f o r carrying out the simpler f i v e - y e a r plan. It was subsequently found that by 1942, only one-third of the number of engineers and onefifth the number of skilled workers could be found (154). T o train such a large number of technical men within a few years is next to an impossibility; hence it is absolutely essential f o r China to en-

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courage foreign participation, either as government-employed s u p e r v i s o r s or as privately-hired technicians working in Chinese, joint o r even foreign enterprises. It is believed that Japanese technical men could be advantageously employed in Chinese industries. Of money and men, probably the f o r m e r is more important, hence should be discussed in greater detail. Types of Foreign Investments. These can be grouped roughly into three main categories, namely, direct governmental transactions; public issues by government and private corporations; and business investments (156). China can borrow directly from another government, such as the half-billion dollar US loan of February, 1942. Loans of this type a r e particularly favorable to China, if no political strings a r e attached, since the amounts a r e usually l a r g e r and t e r m s reasonable. To the lending country, the advantage lies in creating a strong and prosperous China for stabilizing world peace and making China a m a r ket f o r her goods. China could obtain equipment, supplies and technical aid by "modified" lend-lease operations. This wartime method of international lending solved the difficulties of US-dollar shortage in world t r a n s actions of goods and services. Its future will naturally depend upon the US foreign policy and domestic politics. Regardless of the continuance of lend-lease, its spirit should be preserved to avoid an immediate US post-war depression, and at the same time, to help the reconstruction of devastated countries such as China. China could get s h o r t - t e r m (two to five year) credits against export guarantees, such as the previous loans against delivery of wood oil, tin, and tungsten. From the lender's standpoint, this a r rangement is favorable. But to the borrower, short-term credits might mean that debts must be paid before the capital goods can be finally amortized. Hence, unless the schedules of amortization a r e balanced against prospective payments, such loans will not be of great value to China. Most of the pre-war foreign obligations of the Chinese Government, including all the Chinese railway loans, were in the form of public issues. If the issue is large, the credit standing of the borrower good, and the risk of exchange instability negligible, this is a particularly suitable method. With respect to future possibilities in China, outstanding foreign debts (157) and restrictions on the sale of foreign securities in the lending countries discourage this type of investment. As f a r as private corporations are concerned, they must f i r s t become large in order to make public issues worthwhile.

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"Direct investment" under the protection of extra-territorial rights was formerly the most common type of foreign investment in China. It was advantageous to the foreign investor because of the freedom of action; and beneficial to China for the part it played in modernizing China. The only detrimental effect it had on China's economy was the unsystematic nature of the development. But with the abolition of the special rights, China can look forward to a more rational plan of industrialization. Foreign investors, on the other hand, need not fear excessive restrictions since the policy of the Chinese government is considered liberal. "Joint investment" perhaps holds even greater promise for the future of foreign investments in China. The pooling of resources and the sharing of experience in a purely businesslike manner point to greater economy to both the Chinese and foreign investor. But it must be remembered that inherent difficulties, such as the scarcity of Chinese capital and hence the higher interest rates, mean that it is advisable for foreign investments to be proportionally greater. Joint enterprises between a private Chinese corporation or the Government on the one hand and a foreign corporation on the other, which are aimed at training the Chinese partners to eventually take over the management, would be especially valuable to China. The successful operation of the China National Aviation Corporation is a good example. However, the above mentioned "joint investment" should not be confused with the type of joint control recently imposed upon China in her northeastern provinces. The Russians, in signing the SinoSoviet pact, demanded in part as a price of her entry into war against Japan, partna-ship in the main Chinese railways and naval bases. Recent demands for joint control extend to industries, mines, and airfields (158). That these moves are aggressive and probably will be detrimental to China's industrial development is self-evident. An old-fashioned form of foreign investment is "concessions." Here, as in direct investments, foreigners are allowed for technical reasons to engage in the operation of certain projects or lines of industry, sanctioned by the Government, with the privilege of monopoly or semi-monopoly during the life of the concession, with or without a guaranteed rate of return, but subject to return to or repurchase by the Government at cost or cost plus a reasonable compensation. This method was successfully employed in Argentine, Brazil and Cuba. Theoretically, such arrangements would expedite China's industrialization, while appealing to foreign capital. Re-

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2 17

cently, the Universal Oil Products Company of Chicago announced that an agreement had been concluded with the National Resources Commission of China for the establishment and development of a modern petroleum refining industry in China and Formosa (159). China should look into the great possibilities of this source of foreign investment. Liberal Government Policy Towards Foreign Participation. The post-war economic policy of China provides foreign investors with considerable freedom of action. All foreign or joint companies formed will be treated exactly like Chinese ones, with no discrimination in taxation. As long as China's sovereign rights are not endangered, they are welcomed if they can fit into the national plan of development. One of the most important points recently announced is that no restriction shall be placed on the percentage of foreign participation and management in a Sino-foreign enterprise. Only the chairman of the board of directors must be a Chinese. Thus the rule r e quiring 51% Chinese capital investment, and a Chinese manager is abolished. Foreign investors in joint companies can now feel secure as to how their money is used. Another important point is that foreign nationals, in conformity with Chinese laws, may establish branch factories, branch business houses, and independent business enterprises in China. This generally means that all pre-war foreign corporations (axis nations excluded) can practically conduct their business as they did during the "concession" days. New companies, especially those which have main offices in their home countries, can easily be established after the Government's examination and approval. Foreign investors need not fear restrictions and discrimination if they are permitted to begin operations. The opportunities for purely foreign companies seem as good as ever. Even in state-dominated industries, foreign corporations can sometimes obtain special charters to develop certain important industries. In all cases where foreign capital is invested, technical men and administrators are encouraged to come to China to assist in the development and operation of the industries. Chinese policy towards foreign participation seems to be as liberal as it could be under a planned economy. Yet foreign investors may still feel that "economic regulation" is too great in China. However, in this era of nationalization, the Chinese plan cannot be considered any more rigid than those imposed in other countries.

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NATIONALIZATION

DEVELOPMENT OF COAL

MINING

OF IN

CHINA

The general economic policy of China points to greater state regulation of the coal mining industry. The need for a national control scheme to coordinate the activities of existing coal enterprises has been evident for some time. Now that the Government has made elaborate plans to make present mines more productive, and to help develop new mines, this need is accentuated. It is not yet known to what extent or in what form coal nationalization will develop, but certainly this industry, like the other basic industries, will be regulated. National control schemes in coal-mining is not a new thing, and successful practices hav? been established in many countries, such as Germany, Great Britain, Poland and Japan. Movement Towards Regulation in Coal Mining. Between 1870 and the f i r s t World War, rapid industrial expansion and growth of population in Europe and America called for larger volumes of coal. Hence, coal companies on the whole fared well under a system of free competition. Unfortunately, "surplus capacity" was created in this process, while coal markets became gradually stabilized. The result was violent fluctuations of output, prices, profits, and wages. To cope with this situation, one important coal-producing country after another began to adopt national systems of economic control, government or quasi-public, for dealing with problems in home and foreign markets. Unlike most of the industrialized countries, China's coal markets have not become saturated. But already, problems such as the fair allocation of markets, the rational development of productive c a pacity, the necessary standardization of productions, and the need for cooperating with state railways, are beginning to call for unified effort. Furthermore, the Chinese Government realizes that a coordinated plan at this early stage of coal development will not only hasten the expansion, but probably save the coal operators from consequences of "over-capacity" and "cut-throat competition." In Germany, all private coal companies were controlled by ten regional coal-mining cartels, of which the Rhenish-Wesphalian Coal Syndicate was nearly a "monopoly" in itself (162). Nominally, the German Government supervised the organization of the coal industry; but actually, all powers for regulating output, marketing, sales and prices rested in the hands of the c a r t e l s . Under a " c a r t e l " system, private enterprises, though limited by output quotas, a r e assured stability in operation and marketing. However, the inherent difficulties of estimating market requirements and fixing the most

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suitable prices make the cartels work best in a "matured" industrial economy like pre-war Germany. Conditions in the Chinese coal industry are such that varied financial interests prevent the formation of cartels in the first place; and even if they could be formed, profitable prices might curtail output in an expanding market. As far as allotting output quotas and sales shares are concerned, the practice is definitely advocated. In Great Britain, recent legislation is about to place the 850 mines, valued at US $600,000,000, completely in the hands of a nine-man-government-approved board, which will only take orders from the Minister of Fuel and Power (160) (161). The advantages of complete nationalization are similar to those of large corporations where overlapping expenses could be reduced and business policy centralized. But like the latter, private incentive will be greatly curtailed. Successful nationalization naturally depends upon efficient government administrators, which Great Britain can fortunately provide. Other national coal schemes had been previously devised. Under the Coal Mines Act of 1930, a Central Council composed of representatives of colliery owners was set up to allot output quotas and sales shares. Another part of the Act provides for compulsory amalgamation of neighboring collieries by the Coal Mines Reorganization Commission, a quasi-judicial body (163). It is neither practical nor desirable for the Chinese Government to buy all the privately-owned mines and prevent more from opening. With the technical men directly under its employ, the Government is already facing difficulties in taking over the Manchurian mines. More important, the Government is relying upon private enterprise to contribute towards the future development of the coal industry, while it undertakes the operation of others. Like the British Government, the Chinese Government can and should at least promote formation of "Central Councils" of private mines to coordinate production and marketing policies. The theory of merging small collieries in a given region into larger and more efficient ones is especially applicable to some Chinese mines. With the exception of the United States, all of the major plans for the economic control of the coal mining involve the setting of output and sales quotas. Almost all of them aim likewise at fixing minimum pithead prices. Most of them practice the preferential zoning of home and foreign markets in favor of individual districts and of individual mines. Many of them provide facilities, where needed, for raising home market prices in order to offset the competitive

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prices of sales to foreign markets. In countries where coal is mined in several basins, the machinery of control has to aim at coordinating the market activities of regional cartels or combines. When China reaches the stage of industrialization where the domestic and international coal markets become saturated, she will have to look into the more rigid and complicated methods of coal control as practiced in other countries. At the moment, however, her main problem is to rationalize and regulate her coal development. Probable Status of the Future Chinese Coal Industry. From viewing the Government policy, it can be expected that the coal industry will be controlled under an overall plan of industrial development. Through its powers o examination and approval, the Government can dictate as to what new mines should be developed, and what old mines should be expanded. It is likely that coal production will be increased near the Yangtze Delta wherever possible since the industrial markets there should not continue to depend entirely upon more expensive northern coals. The same can be said for central China where the coal of Hunan, Hupei, and Kiangsi provinces could be profitably exploited to meet the present and future industrial demands of that area. In the far south, several small mines could be expanded to satisfy the regional requirements. In North China, where most of the coal reserves and production now are, new industries could be built closer to the mines so that the high grade coals could be fully utilized. Some plans must be on foot to develop small iron works, cement, and chemical plants in Shansi in conjunction with the great coal deposits, as has already been started in Shansi. In southwest China, coal development must be coordinated with water power. The problem in the northeastern provinces lies in creating more industries to utilize the coal production available. Coal development will probably be related to China's future iron and steel centers, and railway construction. Hence, from all indications, the development of the coal industry will pass from the "unsystematic" to the "rational" stage in the post-war era. The coal industry, aside from fitting into a national plan, will probably not be completely government-controlled. However, it will see greater state participation than in the past. For instance, most of the large Manchurian mines which were developed entirely with Japanese capital will definitely be government-owned and operated (164). Other Sino-Japanese organizations will be at least partly state-owned, with the possibility of private interests being bought out. As far as the development of new mines, the Govern-

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ment has reiterated its intention "to lead in the development of heavy industries." The author would venture to estimate that when the Japanese mines are taken over, nearly one-half of the present Chinese coal production will be government-controlled. But there will still be room for private enterprise. As it stands now, private mines are still more important than state mines. In the future, the condition will probably be about as follows: Coal production can now reach 40 million tons per year and the goal five years hence is 60 million tons, then the remaining 20 million tons will be apportioned between private and state enterprises. The exact quota given to private enterprise will depend, f i r s t of all, on how much the state can handle (the Government is already short of men in Manchuria); and, secondly, how successful private production will be. If private operators can furnish sufficient capital and men to meet the quotas given to them, then it is likely that future quotas will be greater. But if this condition is not fulfilled, then the state will be forced to bear more of the burden. Naturally both the government and private enterprises need f o r eign assistance. Joint enterprises have been generally successful in the past, and could be in the future. As to the methods of foreign participation, the Government could allow certain production quotas to foreign operators on the "concession" basis, with or without profit guarantee. The Government could form joint corporations with foreign parties on a purely business basis. Private Chinese parties could also form joint companies with foreign companies or individuals. In encouraging foreign participation, it should be emphasized that the Chinese coal industry is not a "sick" or old industry; on the contrary, its markets will be rapidly expanding. The nationalization of the coal industry under an overall economic plan, whereby state, purely Chinese, joint and perhaps even purely foreign enterprises are allowed to co-exist, probably ensures the most rapid development. In the future, the Government should also promote the formation of "control councils" not only to regulate the output, but to apportion markets and eventually fix prices in the coal industry.

BIBLIOGRAPHY

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63. Torgasheff, B. F . Mining Labor in China. Shanghai: 1931, p. 59. 64. Shih, Kuo-heng, Mine Workers (in Chinese). Kunming, China: Yenching-Yunnan Station for Sociological Research, National Yunnan University, 1945. 65. Hou. T . F. General Statement on the Mining Industry, Special Report No. 5, Geological Survey of China, 1935, pp. 2, 106-9. 66. Chinese Economic Yearbook, 1936, p. 63. 67. China Labor Yearbook (in Chinese), Ministry of Industry, P a r t I, 1934, pp. 262-4. 68. Chu, H. C. "Mines of Hopei Province," (in Chinese), KwangYeh (Mining and Metallurgy), Chinese Institute of Mining and Metallurgical Engineers, Vol. 5, No. 18, August, 1932, pp. 83-90. 69. Liu, Hsin-Chuan. Labor Conditions in Chunghsing Coal Mine, Shantung. Peiping, China: Institute of Social Research, 1933, pp. 1-43. 70. The World Coal-Mining Industry II, Social Conditions. Geneva: International Labor Office, Studies and Reports, Series B, No. 31, 1938, p. 6. 71. Report on the Mining Industry in Shantung (in Chinese). Shantung Provincial Bureau of Industry, 1930, p. 151. 72. Wang, Κ. T. Report on the Mining Industry in Honan (in Chinese), Geological Survey of Honan, Kaifeng, 1933, p. 202. 73. A full text of the Mines Law of 1936 (in Chinese) is reprinted in the Mining Weekly, Chinese Institute of Mining and Metallurical Engineers, No. 387, June 21, 1936, pp. 33-5. Also found in the National Government Gazette, China, June 26, 1936. 74. a. An English translation of the Factory Act is reprinted in the National Government's Law and Regulations Affecting Trade. Commerce, Finance, etc., Vol. 10, British Chamber of Commerce, Shanghai, 1933, pp. 1-18. b. Also discussed in detail in Wagner, A . B . Labor Legislation in China. Peking China: Yenching University, 1938, pp. 95143. 75. See China Labor Yearbook (in Chinese), Ministry of Industry, Part II, 1934, pp. 30-4. 76. Lieu, O. S. "Certain Vital Problems of China's Industry," China, The Annals. American Academy of Political and Social Science (November, 1930), p. 181. 77. China Handbook, 1937-1943. MacMillan, 1943, pp. 464-6. 78. Chang, Κ. N. China's Struggle for Railroad Development. The John Day Co., 1943, p. 297.

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79. "Jap Exploitation of China's Northeast," China at War, Vol. XV, No. 5 and No. 6 (November-December, 1946), pp. 25-6. "More than 13,000 kilometers of railways were estimated in use in Northeast China early in 1943." 80. Rowe, D. N. China Among the Powers. New York: Harcourt Brace & Company, 1945, p. 105. 81. C r e s s e y , G. B. China's Geographical Foundations. McGrawHill, 1934, p. 49. 82. China Handbook 1937-1943. MacMillan, New York, 1943, p. 250. 83. Chen, Han-Seng. "Economic Disintegration in China," Pacific A f f a i r s (April-May, 1933), p. 181. 84. Arnold, Julean. China-Α Commercial and Industrial Handbook, U. S. Government Printing Office, 1926, p. 268. 85. C r e s s e y , G. B. A s i a ' s Lands and Peoples. McGraw-Hill, 1945, p. 46. C r e s s e y gives a total of 75,000 miles of roads. 86. Highways in China: Tables, Charts and Maps. Nanking, China: Bureau of Roads, National Economic Council, 1936, Table 24. 87. Ting, L G. "Coal Industry in China-II," Nankai Social and Economic Quarterly, Vol. X, No. 2 (July, 1937), p. 231. 88. Baker, J. E. "Transportation in China," The Annals, China, American Academy of Political and Social Science (November 1930), pp. 161-2). 89. Reports on the Operation of the Chungfu Joint Administration, July to December, 1935 and January to June, 1936, pp. 3-8 and pp- 4-16 respectively. Cited in (87, pp. 224-5). 90. "Analysis of Interport Movement of Chinese Produce," The Trade of China, Statistical Series No. 1, Vol. IV, Maritime Customs, Kelly and Walsh Ltd., Shanghai, (1937), p. 81. 91. Collins, W. F. Mineral Enterprise in China. Tientsin P r e s s , 1922, p. 177. 92. Bain, H. F. Ores and Industry in the F a r East, Revised Edition, New York: Council on Foreign Relation, 1933, p. 19 and 254. 93. Statistics of Chinese National Railways, for July 1, 1935-June 30, 1936. Nanking, China: Ministry of Railways, April, 1937 p. 43. 94. Spurr, J. E. and Wormser, Ε. E. Marketing of Metals and Mine r a l s , 1925, pp. 277-8. The mines in 1941 number over 7000 95. See Moore, E. S. Coal. John Wiley and Sons, 1940, pp. 334-45 for details on coking coal requirements. 96. A. S. T. M. Standards on Coal and Coke, Report of Committee D-5, October, 1938, p. 102.

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116. Chu, H. C. "Hopei Mines," Kwangyeh (in Chinese), Chinese Institute of Mining and Metallurgical Engineers, Vol. VII, No. 22 (June, 1934), p. 8. 117. Ting, L. G. "Coal Industry of China-II," Nankai Social and Economic Quarterly (July, 1937), p. 274. 118. General Statement on the Mining Industry (in Chinese), Special Report No. 5, Geological Survey of China, 1935, pp. 113-4. 119. Ting, L G. "The Coal Industry of China-II," Nankai Social and Economic Quarterly (July, 1937), p. 209. 120. Chang, K. N. China s Struggle for Railroad Development. John Day, 1943, p. 312. 121. The World Coal Mining Industry-I. Geneva: International Labor Office, 1938, p. 47. The mine consumption of coal is lower than 5% of the output in U. S collieries. 122. "Electric Power Development in China," Transactions, Third World Power Conference, Vol. II, U.S.Government Printing Office, 'vVishington (1938), pp. 123-4. This source gives the coal consumption for electric utilities as 1.509 million metric tons. About 55% of the coal was consumed by Chineseowned plants, the rest by foreign plants. 123. China Handbook, 1937-1943. MacMillan, 1943, p. 482. 123a. "Mineral Resources of Japan," Foreign Minerals Survey, U.S: Bureau of Mines (October, 1945), p. 82. 124. Wang, K. P. "Mineral Resources of China," Geographical Review, Vol. 34, No. 4 (October, 1944), p. 625. It is recently suggested that iron ore reserves in Manchuria alone amount to more than 2 billion metric tons. See The New York Times, March 10, 1946, p. 4E. 125. Strain, H. A. "More Steel for Free China," U. S Steel News,· (July, 1945), pp. 10-12. The methods employed to make wrought and pig iron are explained here. 126. Read, T. T. "Economic-Geographic Aspects of China's Iron Industry," Geographic Review, Vol. 33 (January, 1943), pp. 42-55. 127. "Jap Exploitation of China's Northeast," China at War, Vol. XV, No. 5 and 6 (November-December, 1946), pp. 25-6. 128. Chiang, Kai-Chek. China's Destiny (in Chinese), 1943, pp. 1507. 129. Shanghai Evening Post and Mercury (U.S.Edition). New York, May 11, 1945, p. 1 and 4. 130. Jen, Mei-Ngo." Problems of Geographical Location of the Chinese Iron Industry" (in Chinese), Hsin Ching Chi (New Economy), Chungking (June 16, 1941).

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150. China Handbook, 1937-1943. MacMillan, 1943, pp. 431-2. 151. Cressey, G. B. A s i a ' s Lands and Peoples. McGraw Hill, 1944, p. 164. 152. Bailie, Hugh. United P r e s s dispatch from Chungking dated October 17, 1945, the New York Herald Tribune, October 18, 1945. 153. See "Principles for China's Economic Development," China at War, Vol. XIV, No. 2 (February, 1945), pp. 20-3. 154. Wong Wen-hao. "China's Wartime Economy - I , " Contemporary China (August 24, 1942). 155. Fong, H. D. Post-war Industrialization of China. National Planning Association, 1942, p. 55. 156. Lin, W. Y. "China's Capacity to Borrow Foreign Capital," Pacific A f f a i r s , Institute of Pacific Relations, Vol. XVII, No. 4 (December, 1944),pp. 452-8. 157. See Rowe, D. N. China Among the Powers. Hárcourt-Brace and Company, 1945, p. 93. 158. See The New York Times, January 17, 1946, p. 1. 159. See The New York Times, January 18, 1946, p. 9. 160. The New York Heral3~Tr"ibune, December 21, 1945, p. 3. 161. See also "Reflections on the Coal Nationalization Debate," The Mining Journal, London (February 9, 1946),pp. 101-2. 162. See Stockden^A. H. Regulation in Industry. Columbia University Press, 1932, pp. 1-154. 163. The World Coal-Mining Industry - I. Geneva: International Labor Office, 1938, p. 234. 164. See Wong, Wen-hao "A Report on China's Economic Administration," Contemporary China, China News Service, New York, Vol. V, No. 25, (April, 1946).