China will further relax government control on the price and trading of coal in 2008, following its policy released earlier this year which allows coal producing and consuming enterprises to negotiate prices on their own.

   The National Development and Reform Commission (NDRC) stated in its latest "Circular for Better Docking of the Trans-provincial Production and Distribution of Coal in 2008" that it will stick to the policy of liberalizing coal pricing and reinforce the power of the major producers and consumers of coal to set coal prices through negotiation. The NDRC's policy is to form at the earliest date a coal pricing mechanism that reflects market supply and demand, resource scarcity and environment costs.

   Coal producers and consumers will sign their annual coal supply contracts in the first quarter of 2008. The NDRC circular ruled that no governmental bodies, institutions or firms should intervene with the negotiation and contract signing process.

   China's demand for coal is rapidly growing with economic development. China became a net coal importer in 2007, importing coal from Indonesia, Vietnam, Australia and Mongolia. Rising demand and import could push up domestic coal prices in 2008.