Coal production in Inner Mongolia, China's major coal reserve, slumped 7.4 percent in the first seven months of 2014 year on year, local coal safety authorities said on Wednesday.
The decline was smaller than that registered in the same period last year, but the coal market is still severely oversupplied by Inner Mongolia.
Market demand for coal is expected to remain sluggish.
Analysts expect a series of mergers and acquisitions as small and medium-sized mines accounted for less than one quarter of last year's production. Meanwhile, big coal companies saw production surge more than 20 percent.
To help its major industry, the regional government has lowered fees concerning coal production and persuaded downstream companies to ink long-term deals with coal mines.