Other Industries

Season finale

One of China’s oldest monopolies finally gets broken up

Salt w

China’s salt monopoly dates back more than two millennia. For hundreds of years the country’s emperors relied on salt taxes to fund their military might. Later, the proceeds paid for parts of the Great Wall.

With that kind of history, news that the monopoly is ending seems symbolic, especially at a time when some of the other commitments to ‘roll back the state’ have turned out to be more talk than action (see WiC230).

The changes to the salt industry have been under discussion for two years (we first broached the subject in WiC236). Last week the State Council finally confirmed new rules which now permit salt makers to sell directly to consumers, rather than only to state distributors.

China Salt will lose its role as regulator and sole marketer of the commodity. Its former authority was absolute, even in upholding rules that led to farcical situations like punishing a restaurant owner for bringing salt a few miles from his old noodle shop in Xinzheng to his new eatery in nearby Zhengzhou.

Another outcome of the monopoly was corruption. Producers had to battle for quota from their local salt bureau and there were frequent reports of officials demanding kickbacks. The arrangements were blamed for stifling investment and innovation too – one piece of research has estimated that average yields from Chinese salt fields were four to eight times lower than those in more technically advanced countries.

The Chinese media has reserved its judgement on the impact of this month’s reforms. Research from Wuhan University has suggested that people were stumping up three to four times more than the prices China Salt was paying to producers. But there wasn’t much clamour from consumers for cheaper salt because it isn’t a major component of living expenses. Prices may drop in some cities, says Tencent Finance, but they could rise in rural areas because of transport expenses. Some of the larger state salt makers also look better positioned to profit than smaller privately-owned producers. “The state-controlled pricing power may get transferred to these new oligarchs,” Tencent predicts.

More important than price for many shoppers is that the salt they are buying is healthy. In light of China’s blemished food safety record, there are fears that unscrupulous traders could mix cheaper industrial salt with the edible variety.

The monopoly was also designed to introduce more iodised salt into the Chinese diet, something that freer conditions had failed to provide in the past. In fact, during the freewheeling years following Deng Xiaoping’s economic reforms, privately-owned producers had forced their way into the market. Many of them sold low-grade non-iodised salt, leading to a situation in which people weren’t consuming enough of the iodised variety that helps to prevent goitre and other health problems. Worried by the public health implications, the authorities beefed up the powers of the salt bosses in the mid-1990s.

The reaction to the end of China Salt’s empire has shown that not every monopoly is ‘monstrous’ as far as consumers are concerned. “Compared to other food products, salt is both cheap and hygienic,” one netizen noted when the plans were first flagged two years ago. “Is there any way to get rid of the costs of monopoly while keeping its benefits?”

“There’s no need to make every stupid demand from the public into a reality,” another warned this week. “Most people have no idea what kind of salt their bodies need.”

The State Council says that regulators will make sure that high quality salt is delivered under the new regime. Even here, the argument isn’t clear-cut, however. As WiC has reported before, critics of the monopoly have argued that too much iodised salt is now consumed in China, triggering health problems rather than preventing them.

For example, Oriental Outlook says a number of surveys suggest that consuming too much iodised salt is leading to more cases of thyroid cancer. Regulators will now allow up to 10% of China’s salt output to be iodine-free, giving consumers a choice.

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