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A Mongol herdsman named Gegenhasi stands in front of his new house to welcome guests in the Huhenuoer Grassland. - 

BOB MOON: Just south of the country of Mongolia sits the northern Chinese province of Inner Mongolia. It's become the scene of what authorities have called a "war like" situation. Troops have descended on the region, in response to days of protests over large-scale coal mining.

As our China Bureau Chief Rob Schmitz reports, the Chinese government is moving to overhaul the region's mining industry.

ROB SCHMITZ: A few weeks ago a group of sheep herders in this remote region stood in the way of a coal truck. They wouldn't allow the driver to go any further. But the driver did. He ran over one of them, dragging him the length of a football field, killing him.

The herder was ethnic Mongolian; the driver was Han Chinese, the country's ethnic majority. In the past, ethnic conflicts here have usually had one outcome: a brutal crackdown by government police. But this is more than an ethnic conflict.

Mongolian activist Enghebatu Togochog says it's an economic one.

ENGHEBATU TOGOCHOG: Inner Mongolia has become the energy base of China and becoming the largest coal producer of China.

And that's why China's government is handling these protests delicately. The government has suspended mining in parts of the province and it's ordered mining companies to make sure they stay out of the sheep grazing land of locals. A slowdown of coal mining in this region threatens to raise energy prices at a time when the price of doing business in China is increasing like never before.

In Shanghai, I'm Rob Schmitz, for Marketplace.

Follow Rob Schmitz at @rob_schmitz