Analysis Of Contracting In Property Rights Reform

Coal is one of the most consumed energy of our country, and its importance is so self-evident. As the biggest coal-produced province, together with the rapid booming of the coal industry Shanxi is also facing a huge problem of negative externalities, such as damage to the environment, safety and frequent accidents, raising a number of issues such as corruption, rent-seeking and so on. In result, Shanxi initiated policies of forcible coal industry merger and acquisitions in2008, aiming to solve the long-existing maladies. As mine property rights reform will have a long-term impact on local economic development, and at the same time Shanxi is coal-producing province, so conducting the case study on Shanxi coal industry reform has its theoretical and also practical significance.This paper first outlines the mine property management system changes in China’s development history, building a good knowledge of background for the following analysis. Due to the specialty of the China’s history of coal mining management, that is, tremendous change from the traditional planned economy period towards post-reform and opening up economy, the rigid management in planned economy period leaves behind a series of residual problems in current permission to the transference of mineral rights.In Chapter Ⅲ of this paper, we apply on the analytical framework of contracting for property rights first proposed by Libecap. The main three aspects of analysis include motivations for a contracting action, the involved contracting parties and the main factors affecting the contracting process. Based on previous research, from a cost-benefit perspective, we analyze the action selection process of the interest-related parties through figuring a game model of behavior. We try to analyze the large-scale government-led process of mandatory property contracting, and to explore a new approach of reduce transaction costs in reforms. The model will provide a theoretical reference for the reform of mineral rights in other provinces.The fourth chapter we will carry out a case study on property rights re-contracting process, based on the typical Shanxi coal mine reform, trying to elucidate the lessons from Shanxi coal mine property restructuring. Gains from re-contracting can be previewed as corporate gains and social gains, namely by looking into the statistics from productivity (recovery ratio as the criteria) and the safety level(death rate per million tons as the criteria). Through these data indicators, it can be sure that merger and acquisitions in coal mine have made remarkable achievements. But we should also pay close attention to critical problems occurred in the integration, such as the pattern of acquisition that is selected, the existence of asymmetric information that increase the transaction costs of property rights contracting, reduce the efficiency of property rights changes.In the last part of the paper we draw basic conclusions that merger and acquisitions should be under a market-oriented environment, and governmental over-intervention will result in market mechanisms distortions, increasing the conflicts and cost of the reform process, and also impairing of the benefits of reform and timeliness. Summary of lessons learned from Shanxi coal mine reform can give constructive advice to coal industry policies in other regions.