The coal industry has proved to be one of the most strategically important but also one of the most problematic industries in China. Closing small township and village owned (TVE) coalmines, declaring loss-making state-owned (SOE) mines bankrupt, and building up modern coal corporations are all causing huge difficulties for the government. The main reason for the problems now facing the industry is the fact that TVEs, SOEs and coal corporations were encouraged to meet different needs at different times and now all face different challenges from development, transition and globalization. This article uses research from the three major categories of coal companies in China to demonstrate that, while these three parallel challenges do necessitate reform in the industry, this reform must be handled cautiously, innovatively and in a balanced way.