If you think you have a difficult job, spare a thought for Tian Shangwan. His task is to persuade investors to buy shares of Inner Mongolia Yitai Coal, after net profits plunged 64 per cent in the first half of the year and the coal industry is experiencing its worst year since 1949, with consumption falling, prices down 8 per cent and stockpiles a record. The company's B shares closed on Friday at 10.8 US cents on the Shanghai market, half of what it was before the half-year report came out on July 29 and down from a peak of 68 cents last year. 'Considering the state of China's coal industry, we performed well - we made a profit,' said Mr Tian, a Yitai director, in the office in the cavernous building the firm shares with its controlling shareholder, the Yimeng Coal Group of Inner Mongolia. About 50 metres from the front door, a steam locomotive carries a train laden with coal, while trucks and donkey carts laden with the black gold negotiate the bumpy road outside. 'The group has made a profit every year since it was set up in 1988 but China's coal industry has never seen a year as bad as this,' said Mr Tian, who looks like a miner with his dark skin and rough features. In fact, he joined the firm a year ago after a career as an accountant and official. 'Coal prices have come down, there is over-supply and the economy is not growing as fast as it should. No one expected [gross domestic product] growth in the second quarter to be lower than in the first,' he said. 'It is hard to say when the coal market will improve. The only good news is that prices have stopped falling.' In the first half of this year, Yitai produced 370,000 tonnes of coal, just 25 per cent of its full-year target. It shipped 1.87 million tonnes and sold 1.074 million, against a full-year target of five million tonnes for both shipment and sales. Are these not all good reasons for selling Yitai shares, Mr Tian? 'Tell me a better sector. Electrical appliances? 'Except for shares in sectors with a state monopoly, there are not any. Coal is a good bet. It accounts for 70 per cent of China's power and nothing can replace it. When GDP goes up, so does coal. We have excellent, long-term clients like the Baoshan Steel Works and the Shanghai Power Bureau.' How different it all looked on July 13 last year when Yitai issued 166 million B shares, at 40.73 cents a share, and attracted such blue-chip buyers as Robert Fleming, Royal Bank of Scotland, Citibank, Brown Brothers Harriman and ABN-Amro Bank. The appeal was the first share from the mainland's coal industry, a good concept in that coal is and will remain the country's main source of energy and Yitai's position in the market as a producer, shipper and seller of coal, enjoying preferential policies from the Inner Mongolian Government. The timing was close enough to July 1 to ensure the stock benefited from the handover fever, especially among the local investors who account for the majority of trading in B shares. Since then, like shares across Asia, Yitai has been hit by factors that no one could have predicted that July day. Growth in the domestic market has slowed and, for the first time since 1949, consumption of coal has dropped, with consumers switching to other sources of power or using coal more efficiently. In the wake of the Asian crisis, many European and United States fund managers dumped their Asian portfolios piecemeal, regardless of the country. For those interested in mainland coal, the H shares of Yanzhou Coal, based in Shandong, issued earlier this year, were a more attractive option. Yanzhou is a bigger company and closer to the market than Yitai, said Alexandra Conroy, a senior investment analyst with ING Barings in Shanghai. In a deflationary environment, the cost of transportation becomes more important. Yitai lost its novelty value. The company's underlying costs have not fallen and its first-half results this year were disastrous. Yitai was unlucky to have issued B shares rather than H shares in Hong Kong or A shares in the domestic market. Investors, both foreign and domestic, have deserted the B-share market, driving the index to record lows below 30 points, citing a lack of good companies, too limited a selection and low liquidity. The A-share market has also fallen but less spectacularly. It has more than 700 firms, in Shanghai and Shenzhen, a far higher turnover and has a wide range of companies that more accurately reflect the overall economy than the B market. Brokers estimate that there are few foreign investors left in the B market, even though it was designed to be exclusively for them. Mainland investors can trade shares nominally on behalf of someone outside the country with foreign currency but often on their own account. Liquidity is so thin that the authorities turn a blind eye to this, while they search to define a future for the B market.