China’s recent moves to shift away from coal consumption, through decisions to reinstate MFN tariff levels on coal imports and ban low-grade coal imports entirely, will likely add to the strain on coal producers, who are already hurt by declining worldwide commodity prices. In particular, the Vietnamese coal industry, which was China’s top source of imported coal until 2013, is likely to be negatively impacted by this Chinese policy change.
Vietnam’s coal industry has taken off since 2000, but most of this expansion has been export-driven rather than domestic. Since 2005, coal as a share of total electricity production in Vietnam has leveled out at around 20 percent (right axis). However, Vietnamese coal production (left) has tracked the relative importance of the Chinese market for exports. As the share of Vietnamese coal exports bound for China increases, so does overall Vietnamese coal production; the year after China eliminated coal tariffs, over 70 percent of Vietnamese coal were to China.
Sources: Author’s calculations using data from World Bank WDI and WITS databases, and General Statistics Office of Vietnam