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China Still Uses 2,600-Year-Old Law to Control Salt Trade

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From NetEase:

China’s salt monopoly originated during the reign of Han Wudi [141-87BC], and since the Tang Dynasty the income generated by the salt monopoly accounted for over half of the government revenue, and by the Yuan Dynasty this reached 80%. Because of the high profit margin, every dynasty instituted laws to strictly regulate the exchange of salt to protect the income from official salt monopolies, salt trade was restricted by area and cross-region exchange of salt was forbidden. However, officially produced salt was both expensive and of low quality, due to regional restrictions it also led to remote areas not having access to salt. Furthermore, local residents could not privately sell salt. Every dynasty cracked down on the private salt trade, but the private trade still persisted, with local people organizing armed salt traffickers to oppose legal enforcement. After the Tang Dynasty, many rebel leaders who started off as salt traffickers, such as Huang Chao and Zhang Shicheng, directly led to the demise of the Tang and Yuan Dynasties.

From NetEase:

The Pointless Salt Monopoly

Introduction: On March 8th, Taobao.com violated an article of the “Regulation on the Management of the Salt Industry” dictating that salt cannot be sold across regions, and was then forced to remove all salt related listings. Recently, Chongqing uncovered another illegal salt trade case, confiscating 90 tons of industrial salt imitating table salt. In the past decade, calls for breaking up the salt monopoly have persisted, with the salt monopoly itself in present circumstances having long ago lost its reason to exist.

The basis for a monopoly in the name of “national interest” no longer exists

The tax revenue from salt has gradually diminished, and the excuse of “a protective tax” to maintain a monopoly can no longer be justified

Every dynasty in China instituted a salt monopoly system, and in the beginning, it was primarily intended for taxation. Realizing that salt was an essential and irreplaceable commodity in people’s daily lives, and thus can be a stable source of tax revenue, various rulers have nearly all instituted a salt monopoly since the Spring and Autumn period, preventing the common people from producing and selling salt. During the founding of our nation, the salt tax still made up the bulk of government revenues but with the shift in economic development, the salt monopoly as a proportion of government revenue has gradually diminished. The salt tax as a percentage of the total national tax has decreased from 5.49% in 1950 to 0.04% in 2006.

China is number one in the world in terms of salt production, there is ample supply of edible salt, and there is no direct relationship between the monopoly and “social stability”

By 2011, Chinese salt production had reached 81.98 million tons, the highest in the world.

“The salt industry relates to social stability” is a conclusion that can only be derived from the presumption of a “salt shortage”. In ancient times, and even up until the early years of our nation’s founding, salt was in short supply, and thus it became a commodity tied to national security and social stability. In the past, salt in China was primarily from sea salt and due to different climates, the production was unstable. The past decade witnessed the rapid development of mineral and lake salt, and many inland areas relied on lake and mineral salt as the primary source. Salt production grew rapidly from 18 million tons in 1987 to 40 million tons in 2000. By 2011, Chinese salt production had reached 81.98 million tons, the highest in the world.

The monopoly is the sole provider of iodized salt, which can lead to complications from iodine overdose

In the current monopoly system, consumers can only buy iodized salt, “forced to supplement iodine” even when excess iodine causes thyroid disease

Salt producers produce iodized salt in accordance with China National Salt Industry Corporation planned figures. Consumers do not have a choice when purchasing salt, forced to passively accept iodized salt. This creates new public health issues, and both iodine abundant areas and iodine deficient areas have problems of iodine overdose. The Chinese Nutrition Society issued a report: the iodized salt currently on the market contains about 20-50 mg of iodine per kg, with Chinese people consuming about 200-500 mg of iodine per day, exceeding the safe standard of 200 mg per day set by the World Health Organization. Through a 5 year research study, Chinese Medical Sciences University concluded that if iodine continues to be added to salt in iodine abundant areas, it can lead to autoimmune thyroid disease. A surgeon from the No.2 Hospital affiliated with Zhejiang University claimed: “we received 205 cases of thyroid cancer in the last year alone, a 10-fold from 10 years ago.”

“We received 205 cases of thyroid cancer in the last year alone, a 10-fold from 10 years ago.”

Dismantling the monopoly can allow industries to produce different types of salt based on different market needs for consumers to buy. A competitive salt market will not lead to the end of iodized salt. The excuse of “doing away with the monopoly will lead to iodine-free salt to save on costs” cannot be justified. Iodized salt costs little money, 1 ton of table salt costs about 20 yuan to be iodized. Salt with or without iodine can be balanced based on consumer needs.

The monopoly is not necessary for food safety

Under the monopoly system, there have also been companies who as a result of the high prices caused by the monopoly have substituted industrial salt for table salt, so the safeguard for salt safety should be “regulation” and not “monopoly”

The dismantling of the monopoly does not imply the dismantling of regulations. The maladies of the monopoly is stubborn, but potential “food safety” issues can be addressed by proper salt industry regulations and enforcement. This is also what salt management departments should be doing.

The use of industrial salt to replace table salt in making soy sauce and other seasonings has hardly been uncommon in recent years. Outside of moral grounds, the high costs for table salt caused by the salt monopoly is also one of the main reasons for this. Industrial salt and table salt are not actually inherently different, with the difference being in how fine the grains are and whether it is iodized, and the fact that industrial salt is not within the monopoly system and thus cost little. So businesses have chosen to take the risks, using industrial salt to replace “monopoly” salt.

So businesses have chosen to take the risks, using industrial salt to replace “monopoly” salt.

The United States is the second largest salt producer and its salt industry had undergone extensive marketization. America does not have specific laws dealing with the trading of salt, so the salt industry like any other industry are managed by laws such as the Food and Antitrust laws. Salt manufacturers must be registered with the US Food & Drug Administration, the Salt Association and various standards regarding salt products set by relevant government departments, while agencies will also regulate and inspect salt based on different usage and standards. Because of the strict regulations and mature markets, there are no instances of industrial salt used to replace table salt in America.

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A monopoly cannot rapidly increase production based on demand

The salt monopoly system reacts slowly during sudden changes in demand from the market. During episodes of salt panic-buying, the monopoly system demonstrated that it was unable to increase supply in response to market demands

On 2011 March 11th, a major earthquake in Japan caused a meltdown at the Fukushima nuclear power plant. The rumor that iodized salt can protect against radiation poisoning led to the panic-buying of salt across China. After the panic-buying crisis ended and during an internal meeting within the salt industry, China Salt Association director Dong Zhihua believed that this salt panic-buying demonstrated that the decision to maintain the salt monopoly is correct, and stated: “the salt monopoly was a necessity in the past, the present and the future.” But in reality, the ability to provide salt from the China National Salt Industry Corporation was not as good as they claimed. China National Salt Industry Co. director Yang Chunyan revealed in an interview: “during salt shortages, due to standards regarding table salt production and the need to maintain constant production, there is a reluctance to increase salt production in the event of a shortage.” After the salt panic-buying crisis and during a meeting at China National Salt Industry Co., CEO Mao Qingguo expressed that: “during the panic-buying, in order to assure the public, China National Salt Industry Co. claimed that China’s salt stock was abundant. But in reality the situation is not optimistic.“ It can be said that China National Salt Industry Co. had only fought a public relations war.

The efficiency of the stages of salt transportation and sales after production controlled by China National Salt Industry Co. are in practice very low. Regional China National Salt Industry Co. plants must repackage 50kg bags of salt produced by the corporation into 500g, 400g, etc. bags of salt branded as “China Salt” or local China National Salt Industry Co. brands before they enter the retail market. Imagine, if marketization is realized, salt production companies can quickly react and increase production independently in response to changes in market demand.

Mao Xiaofei, a long-term researcher of the salt industry claims: “the reason why abuse in the salt industry hasn’t attracted the attention of the public is mostly because the amount used in people’s daily lives is limited, resulting in a very low sensitivity to its price.”

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The monopoly prevents competition, causing China’s salt producers to be weak

The lack of competition under a monopoly system has caused the salt production industry to lag in technology and product diversity, with the salt market being far less robust than advanced countries

The country’s direct control of salt production and distribution has led salt producers to ignore economic questions such as “how much to produce” and “how to sell”. Salt producers themselves have no decision-making powers, and are merely workshops for the overall salt market. By only producing and not selling/marketing, there is no competition for the companies, who also have no awareness of research and development as well as risk, resulting in the entire salt industry seriously lagging behind advanced nations. For example: rudimentary salt production processes, with little salt product variety and inefficient use of resources; environmental pollution and destruction due solely to the extraction of salt from lakes and mines; low consolidation of the salt industry, with many producers but all small in scale, irrational regional divisions, and seriously improper allocation of resources.

China National Salt Industry Co. is the sole beneficiary in this monopoly

China National Salt Industry Co. controls the price of salt, profiting through the excuse of “adding iodine”, leading to China being the world’s largest salt producer but having abnormally high salt prices

A China Salt Association representative once said during a production and marketing meeting: “the old food/grain system was much more powerful, much more niu, than us. Everyone wanted to join the Food/Grain Bureau, no one thought of going to the Salt Industry Bureau. Once the food/grain industry was reformed/opened up [marketized/privatized], now everyone wants to come to the Salt Industry Bureau. Only with the protection of a monopoly can we exist today.” China National Salt Industry Co. and the Salt Affairs Bureau are virtually one and the same, and the China Salt Association is this interest group’s representative.

Compared to advanced nations, China’s salt prices are clearly on the high side. The United States, France, Australia and China’s average salt consumption as a percent of personal income are: 0.06, 0.04, 0.04, and 0.12 respectively

According to statistics, when salt producers sell their salt product to the China National Salt Industry Co., the invoice price for every ton of salt is about 400 to 500 , while China National Salt Industry Co.’s wholesale price for every ton of salt is between 800 to 1200 yuan, a 60-200% profit margin. According to Article 12 of the “Regulation on the Management of the Salt Industry”, the price difference between wholesale and retail should be controlled within 20%. But in reality, by the time edible salt reaches retail shelves, 1 ton of salt can be sold for over 2000 yuan, a wholesale to retail difference reaching 66.7-150%, far exceeding the regulated 20%.

Scholars have also calculated that the extra money collected by China Salt Industry Co. from every person every year currently is about 10 yuan. But little by little it adds up, with China National Salt Industry Co. and its various provincial salt companies obtaining 13 billion yuan in excessive profit through the “edible salt monopoly”. China National Salt Industry Co.’s total assets increased from 3.7 billion yuan in 2003 to 31 billion yuan in 2010, an 8 fold increase, with total profits going from 84.52 million yuan to 600 million yuan.

China National Salt Industry Co. decides the fate of the salt industry as a whole through its control of salt production standards, and corruption profiting from is not uncommon

China National Salt Industry Co. serves as both the operating company and department responsible for administrative policy, similar to being both the athlete and the referee. As a policy department, it should consider the greater good of the industry, promoting an equal competitive environment. But as a corporation, it itself has the company objective to pursue the maximization of profit. The misplacing of these two roles leads to inequality and corruption.

China National Salt Industry Co. controls the establishment of annual policies, and uses “unwritten rules” within the industry – demanding high kickbacks from salt producers who must accept if they want to obtain any production quotas. An internal report from the National Development and Reform Committee [NDRC] also raised that production companies have replaced competition with “policies” and “connections”. In 2007, the largest corruption case since the founding of the nation occurred within the Zhejiang salt industry, involving 10 municipalities, and where the leaders of Hangzhou Salt Bureau were all arrested. In 2008, corruption was also discovered within the Guangdong Salt Industry Co.

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Comments on NetEase:

READ  41 Popular Chinese Internet Memes From 2009

haojiumeiwancs [网易湖北省武汉市网友]:

What era are we in that we still maintain this absurd system.

网易河南省郑州市手机网友:

Motherfucker, we are flying planes and using computers yet we are still harboring a corrupt practice from a thousand year ago.

畅想飞的自由 [网易河南省网友]:

We inherited a great tradition.

网易山东省临沂市手机网友 ip:222.132.*.*:

Haha, I can relate to this. Back in the days my family operated a small mart, earning just a little money everyday, because we sold salt from another region the salt company found out and fined our family 600 RMB. If we don’t pay up they can take us in, with no choice my mother had to borrow money from neighbors to pay them. What crime did we commit? Local salt are of poor quality, with high prices. I hope the government can solve this problem!

好好小学生 [网易台湾省网友]:

Looks like “Socialism with Chinese Characteristics” originated from the time of Han Wudi.

超长待鸡 [网易河南省新乡市网友]:

The salt monopoly should’ve be done away with ages ago. Not only does it no longer impact social stability, it also lost its importance as a strategic commodity. Apart from some insignificant tax revenue, there are no reasons to have strict control over it.

网易天津市手机网友(42.81.*.*):

False, since ancient times salt was an essential commodity, and in antiquity salt can create massive amount of tax revenue. So this is one reason our country refuse to relinquish control over it. Secondly, it is precisely because it is an essential commodity, in the event it is privately controlled, the ability to increase price will be detrimental to a region or even the country, so the country didn’t want to let go of it in order to get tax revenue and prevent social instability due to private monopolies. Even so today’s China is still heavily influenced by the ancient way of thinking, and to be frank it did create a lot of profit.

网易安徽省马鞍山市网友 ip:60.171.*.*:

Really? Look at during the Japanese earthquake, and Chinese people were panic-buying salt. Many supermarkets had no more salt to sell. And there were many unscrupulous businessmen who took the opportunity to sell bags of salt for more than 20 yuan. What the government is afraid of is precisely this kind of situation. Look at the Japanese earthquake, it had nothing to do with you [no direct impact], and still people [could panic-buy salt] like that. If [this market] is opened up and people start to hoard [salt, as speculation for possible profiteering], how dangerous that would be!

网易山东省东营市手机网友 ip:119.186.*.*:

Not just salt but cigarettes too. Cigarettes that do not have the official stamp from the local Tobacco department are considered illegal/private cigarettes.

网易山东省青岛市手机网友 ip:112.224.*.*:

This can be compared to leeches, suck a little blood bit by bit, day by day. Tobacco, alcohol and salt, water, electricity and heat, phone bills, petrol, and transportation, I think I need a blood transfusion.

网易广东省广州市手机网友 ip:14.26.*.*:

Looks like Imperialist America and such countries not acknowledging the Heavenly Kingdom as a market economy is very correct.

网易广东省广州市手机网友 ip:14.147.*.*:

I don’t understand why in today’s society, in an era where a small bag of salt no longer requires any technical expertise to produce and where salt is not rare, we provide jobs to a bunch of people to manage such minor food items. Truly a modern tragedy of China.

网易江苏省扬州市手机网友 ip:222.189.*.*:

Same as the oil monopoly in China.

网易河南省平顶山市手机网友 ip:61.158.*.*:

If it is not controlled then anyone in the market can buy and sell, raise prices as they please, [selling] fake salt or even industrial salt for you to eat. Would you dare consume salt then? Isn’t gutter oil a lesson to be learned already! When certain things haven’t been able to be changed throughout history, do you think a few arguments alone can change them?

Written by Joe

Joe is a documentary producer and journalist based in Shanghai

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