China's top economic planning body has approved the establishment of a "pilot economic transformation zone" in coal-rich Shanxi Province to diversify the northern region's resource-based economy.

The goal of the zone was to transform conventional industries and strike a balance between the agricultural, industrial and tertiary sectors in Shanxi, Peng Sen, vice minister of the National Development and Reform Commission, said at a press conference yesterday.

The zone was also designed to help Shanxi achieve green and sustainable development, bring about equal public services for rural and urban people, and set an example for other central and western regions, he said.

"Shanxi has powered the economic development of other regions, but with heavy economic, social and environmental consequences," said Niu Renliang, vice governor of the province.

In the past 60 years, Shanxi had produced 12 billion tons of coal, of which 75 percent had been transported to other regions, said Niu.

The coal-based economy had not brought prosperity to the people of Shanxi, where the urban per capita disposable income and rural net income ranked lower than 20th among China's 31 provincial-level areas, Niu said.

This had also resulted in Shanxi's overdependence on external demand. "During the Asian financial crisis, Shanxi's economy faced great difficulties. In the 2009 global financial crisis, Shanxi was the slowest growing regional economy in China," Niu said.

Shanxi also suffered from an unsustainable industrial structure. "The sectors of coal and coke manufacturing, power generation and metallurgy accounted for more than 85 percent of its total economy," said Niu.

Other targets for the zone included cutting outdated production capacity, repairing environmental damage, and improving work safety, said Niu.

Energy consumption per 10,000 yuan (US$1,502) of Shanxi's gross domestic product and its sulfur dioxide emissions were both more than double the national levels, Niu said.

For every ton of coal extracted in the province, 2.48 tons of water were polluted, and coal mining had resulted in 20,000 square kilometers of land, one eighth of the province's total area, at risk of subsidence, he said.

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