THE head of Chinese coal giant Yanzhou is tipping the economic powerhouse's demand for coal to recover towards the end of September, with the country's next government continuing to support growth, underpinning long-term demand and strong prices for the bulk commodity.


Weimin Li, chairman of Yanzhou and its Australian subsidiary Yancoal Australia, told investors in Sydney yesterday there were already signals in China that the economy was picking up, adding that the government was already pumping liquidity into the system.


Mr Li said the company was "hitting the button" on projects in Australia and China, waiting for the economy to recover.


"In the domestic market, the Chinese economy has picked up slightly and we are starting to see an increase for demand," he said.


"Long term, China will demand coal for energy."


World thermal coal prices have dropped as much as 30 per cent in the past year to about $US80 a tonne, largely because of increased exports from the US and weaker-than-expected demand from China.


Mr Li said that, despite the recent softening of the thermal coal market, he expected that towards the end of the third quarter Chinese demand would increase.


"From late September, you will see stronger demand and the support of prices will pick up," he said.


Market sentiment on China is also being affected by the once-in-a-decade leadership change. President Hu Jintao, Premier Wen Jiabao and other leaders will resign from their Communist Party posts at a congress in October.


Mr Li said he expected the new government would continue promoting steady growth, with new policies to ensure the economy remained healthy.


"We are already seeing that the government is pumping liquidity in the system," he said. "The government is promoting policies to increase domestic spending to grow the economy and ensure the country is economically stable before the change of leadership."


Yanzhou, which has a market capitalisation of $11.6 billion, owns 78 per cent of Yancoal Australia, created via the merger with Gloucester Coal to build Australia's largest listed coal play.


Mr Li said that as a result of the merger, the parent company had acquired new opportunities to develop in new markets and attract new customers.


He added that Yanzhou was in early talks with Hong Kong trader Noble Group, a major shareholder of Yancoal Australia, about identifying opportunities to improve logistics to maximise sales.


Yancoal chief executive Murray Bailey told investors yesterday that the company was working on its five-year plan and would present it to the board in the fourth quarter.