Shanxi province, the center of China's coal industry, will cut 20 million tonnes of coal capacity in 2017, said the provincial government on Saturday.

Slashing excess coal production capacity would remain top on the local government's agenda in 2017, said Lou Yangsheng, governor of Shanxi, when delivering the provincial government work report to the opening of the annual session of the Shanxi Provincial People's Congress.

"Coal overcapacity reduction should be achieved through market and law-based means," said Lou, adding mergers and reorganizations will be encouraged.

Shanxi reduced 23.25 million tonnes of coal production capacity and shut down 25 coal mines last year. The province cut coal production by 143 million tonnes, or 40 percent of the country's total reduction of coal production, last year.

The province's move is part of a national campaign to cut overcapacity, as tangible results have been achieved.

China achieved its 2016 target of retiring 45 million tonnes of steel and 250 million tonnes of coal production capacity.

Shanxi also sets its economic growth target at 5.5 percent this year, which aims at "leaving wiggle room for transformation and reform" , said Lou.

Obstacles remain on the province's path of economic recovery, such as high debt rate, a lack of new growth engines and talent resources, warned Lou.