The Shanxi provincial governor denied rumors Friday that the province's coal mines have been stockpiling coal resources with an eye on higher coal prices. This was the first time the provincial government responded to such reports.

Shanxi Governor Yu Youjun.

"There is no such thing as stockpiling coal and waiting for the price to go up," Yu Youjun said at a press conference. He added that the coal has been mined and sold strictly in accordance with the central government's plan. "Coal is the last fortress of China's traditionally planned economy," Yu said.

The governor blamed the lack of sufficient railroad capacity, for the gap between coal supply and demand in the market place which is 50 percent short of the market demand.

"It is about the inability to get the coal into the market, rather than the coal mines stockpiling coal resources." he said.

According to Yu, the media has misunderstood how coal prices are set because they are not well informed of the actual situation.

The central government decided earlier this year to carry out a trial on sustainable development of coal industry in Shanxi province. It would include a price adjustment, a comprehensive compensation mechanism for sustainable development, as well as a compensation fund for conserving the environment, and a reserve fund for safety and equipment, Yu explained.

"The compensation mechanism is reflected in the coal price, which has increased twice since last year, both by a margin of 20 yuan, "Yu said.

He went further to say that for decades Shanxi has sustained the entire country's demand for coal, so he believes it is unreasonable for the price to be centrally planned rather than determined by the market. "An appropriated increase is normal, reasonable, and necessary."