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Saturday, November 29, 2014

China ends 2,000 year monopoly on salt


  • The Chinese state’s salt monopoly has survived 23 imperial dynasties, 37 years of republican rule, and 65 years of Communist government.

They say things change quickly in China, but that’s not always true. Some things take a very long time indeed to change. Like the government’s monopoly on table salt, in force for the last two millenniums.

But now, it seems, the longest-running economic policy in the world is running out of steam.

Last week the Chinese government announced it is drafting a plan to free up the sale of salt as part of its drive toward “the progressive completion of the market system.”

Such change would be truly historic: the Chinese state’s salt monopoly has survived 23 imperial dynasties, 37 years of republican rule, and 65 years of Communist government.

Under the monopoly, the government sets the retail price of salt, and it sets it high – four times the price that China Salt pays when it buys wholesale from approved producers. Chinese shoppers pay twice as much as American consumers for their salt. So there is a strong incentive for unscrupulous traders to sell cheap industrial salt, which is freely available but full of potentially harmful impurities, as table salt.

Tracking down such traders is a special “salt police force” whose job it is, among other things, to make sure that nobody is selling salt from one province elsewhere in the country.

“It’s a leftover from the old planned economy,” says Sun Jin, a professor at Wuhan University who specializes in competition law. “The government wants to marketize it.”

Once upon a time, salt was a pillar of the state’s authority, providing essential revenues. Today, according to independent estimates, profits from the China National Salt Industry Corporation bring in about 0.04 percent of the government’s income.

“The economic impact of this reform will probably be close to zero,” says Chen Long, an analyst for economics consultancy Dragonomics.

But that doesn’t mean it will be easy. The government has made five previous efforts to dismantle the state-owned salt bureaucracy (not counting a debate at the imperial court in 81 B.C. in which Confucian scholars argued against it) without success.

With more than 2,000 years behind it, the salt administration is well entrenched and its leaders have been able to fight off reformists. One argument they have made: what to do with the tens of thousands of people who work in the state system who would lose their jobs if the monopoly is abolished?

The real reason for their reluctance, though, says Prof. Sun, is that the table salt trade yields fat profits “that end up with a small group of top officials at China Salt and the government salt industry supervision department.”

Read more: Christian Science Monitor.com

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