The State Council issued a guideline to cut coal capacity on Feb 5, as the country strives to restructure its economy.
A marked decline in coal demand in recent years has resulted in a serious imbalance between supply and demand, which caused substantial losses to the coal industry, the guideline said.
In order to address the problem, the guideline ordered coal production to be cut by 500 million tons in three to five years, starting from 2016.
It also demanded the reduction or restructuring of coal production capacity by another 500 million tons over the same period.
To meet these targets, the guideline said the government will no longer approve any project that increases coal production or constructs new coal mines without meeting strict conditions.
If a new mine has to be built, production capacity should be lowered, the guideline added.
Outdated coal mines in 13 categories evaluated by the State Administration of Work Safety and State Administration of Coal Mine Safety will be shut down, the guideline said.
Coal mines built in natural reserves, scenic areas and drinking water protection areas will be shut down immediately, it said.
The guideline also emphasized that favorable polices to increase financial support, personnel training and land protection would be provided.