Examining China's Coal Industry Re-nationalizing Based on a Mixed Oligopoly Model

Currently, Shanxi and other provinces are accelerating the re-nationalizing of coal industry. Basing on a mixed oligopoly model, this paper examines the rationality of this practice. Firstly, state-owned enterprises can raise the industry output and improve the social welfare in imperfectly competitive industries. Secondly, moderate nationalizing is desirable in order to compensate for the private enterprises' negative externalities in the process of building a market economy. In addition, the government's regulatory policies which must be made under the coal-electricity vertical two-track system are also important contributing factors to current re-nationalizing, because they are discriminate to private enterprises. However, considering the relatively low efficiency of state-owned enterprises, it is reasonable to support the development of private enterprises by improving the market mechanism, and by standardizing regulatory policies in the long run.