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Looking forward to 2019, global economic uncertainties may increase amidst the ongoing Sino-US trade war. Faced with a complex external environment and pressure from an economic downturn, the PRC government will continue to adopt an array of measures and policies to safeguard market development and to stimulate domestic demand. From the perspective of the coal market, the PRC government will continue to implement the “structural de-capacity and systematic capacity optimization” policy. It is believed that in future, the coal market will develop towards a trend of high efficiency and high quality while coal prices are expected to remain stable.

In 2018, the PRC National Development and Reform Commission promulgated the “Opinions on Further Promoting the Merger, Reorganization, Transformation and Upgrading of Coal Enterprises” (the “Opinions”). The Opinions clearly state that it is necessary to actively promote the merger and reorganization among domestic coal enterprises, to further enrich their product portfolio and to expand the scale of the enterprises. Meanwhile, the Opinions support the transition of coal enterprises from single production-oriented enterprises to production and service-oriented enterprises, and promote the coal industry to a medium-to-high level. Furthermore, the Opinions support the development of products with high technology content and high added-value, so as to further boost the mechanization, automation, informatisation and intelligence level of the coal enterprises, thus improving the competitiveness of coal enterprises from a quality perspective and enhancing the risk mitigation capacity of the coal enterprises.

Under the PRC government policies on continuous elimination of obsolete coal production capacities and illegal coal mines, coal enterprises with good quality and with more advanced production capacity in the coal industry will gain more foothold. In the meantime, in response to the ideology of “building modernization with harmony between mankind and nature” raised by General Secretary Xi Jinping at the 19th National Congress of the Communist Party of China, it is expected that policies for environmental protection, safety, technology and scale will become more stringent. The Group has always adhered to the importance of safety and environmental protection and has been given the certification for “Safe and High Efficient Mines in the Coal Industry from 2016 to 2017 – Distinction Class” (煤炭工業安全高效礦井—特級評級(2016–2017年)). In the future, the Group will continue to invest its resources to ensure that the Group will operate as a safe and efficient coal enterprise.

In conclusion, new production capacity in the coal industry will be put in place more rapidly in the future and therefore the output capacity will be further increased. At the same time, the PRC government will continue to promote de-capacity in the coal industry, so as to facilitate the industry developing towards high efficiency and intelligence. Under a stable and prosperous coal industry, it is expected that the Group’s coal production, sales and trading business will grow steadily in 2019 and the Group will generate stable cash flow and profit.