Is China’s dependency on coal a threat to its economic development?

Coal is one of the prime contributors to China’s economic success. This chapter examines China’s coal dependency by looking at the short- to medium-run dynamics between coal price volatility and sectoral stock exchange performance. It discusses the environmental implications of coal consumption, and discusses the relationship between coal demand and economic growth. China’s economic growth depends on its ability to develop an energy-efficient strategy that sustains its economic and social development plans. China’s coal dependency is examined by implementing Granger causality tests to gain insights into the short- to medium-run dynamics between coal price volatility and China’s sectoral performance. The outcomes of the Granger causality analysis indicated a lack of causal effects running from coal price volatility to the selected sectors; an exception was found for the energy and natural resource sectors that exhibited bidirectional causal effects.