Shares in Yancoal, which was required to list on the Australian Securities Exchange by the Foreign Investment Review Board as a condition of Yanzhou’s takeover of Felix Resources assets in 2009, plunged on the news.

Preliminary Chinese Purchasing Managers Index data slid to an eight-month low of 48.1 in March, compared with 48.5 in February and an expected reading of 48.7.

There is now growing speculation that China will miss its GDP target of 7.5%.

Yancoal is one of Australia’s largest independent coal operators and runs the Austar, Ashton, Donaldson, Duralie, Stratford and Moolarben coal operations in NSW, plus the Yarrabee and Cameby Downs mines in Queensland, with the Middlemount operation in Queensland being a partnership with Peabody Energy.

In December Treasurer Joe Hockey allowed China’s Yanzhou to maintain its existing 78% stake in Yancoal.

Hockey decided to remove the takeover conditions, which also included a commitment for Yanzhou to reduce its economic interest in the Syntech Resources and Premier coal mines to less than 70% by the end of 2014.

Hockey attributed his decision at least partly to the coal downturn in Australia.

“Since those conditions were imposed, significant challenges have emerged for the Australian coal industry, including slowing demand, declining coal prices and a number of mine closures,” he said.

“In commitments provided to me, Yanzhou has undertaken to continue to support Yancoal’s ongoing operations in Australia, thereby maintaining its position as a major regional employer.

“So long as Yanzhou continues to own at least 51% of the shares of Yancoal, Yanzhou will ensure Yancoal continues to operate so that it remains solvent. In addition, Yanzhou will extend its existing loans to Yancoal if required, and will support Yancoal’s plans to expand the Moolarben open cut mine.”

But open free-market thinking also seemed apparent with Hockey as he discussed Yanzhou’s aim to acquire Yancoal.

“Yanzhou has previously considered options to seek 100% ownership of Yancoal,” he said.

“While foreign investment proposals are considered on a case-by-case basis, the government has no in-principle objection to 100% foreign ownership of Australian companies where it is not contrary to the national interest and is open to any such proposals from Yanzhou in the future.”