Entering and exiting: Productivity evolution of energy supply in China

The continuous entry of new firms and exit of old ones might have substantial effects on productivity of energy supply. Since China is the world's largest energy producer, productivity of energy supply in China is a significant issue, which affects sustainability. As a technical application, this paper investigates the productivity and dynamic changes of Chinese coal mining firms. We find that the total factor productivity (TFP) growth of coal supply in China is largely lagging behind the growth rate of coal production. The entry and exit of non-state-owned enterprise (non-SOE) partially provide explanation for the dynamic change of aggregate TFP. Specifically, non-state owned entrants induced by the coal price boom after 2003, which had negative effects on TFP of energy supply, while the exit of non-SOEs had positive effects. Furthermore, there is regional heterogeneity concerning the effects of entry and exit on energy supply productivity. More entrants induced by coal price boom are concentrated in non-main production region (non-MPR), while more exits are located in MPR due to the government's enforcement. This provides explanation for the phenomena that productivity of energy supply in MPR gradually surpasses that in non-MPR. We also anticipate our paper to enhance understanding on the energy supply-side, which might further help us make informed decisions on energy planning and environmental policies.