China prepares to dissolve salt monopoly

Workers toiling on great white heaps of salt at Dabuxun Lake or Salt Lake in Golmud, the second largest city in the Qinghai province of China.
Workers toiling on great white heaps of salt at Dabuxun Lake or Salt Lake in Golmud, the second largest city in the Qinghai province of China. PHOTO: MATTHEW C. CRAWFORD

Opening up of tightly regulated industry next year likely to raise competition, lower prices

A white powdery substance is among the few items the mammoth Taobao e-commerce portal is banned from selling.

There is even a 25,000-strong special law enforcement unit that targets the illegal producers and distributors of the substance.

No, it is not drugs they are after but common table salt - the kind that is found in supermarkets and restaurants.

The level of oversight reflects how heavily China controls table salt - from its production to its distribution and price - as part of a state monopoly that has lasted more than 2,600 years.

But this ancient monopoly will be dissolved come January, when the government will free up its control.

Under the reforms announced on Thursday last week, the government will allow cross-region distribution, and licensed producers can become wholesalers to raise competition and lower prices for consumers. Salt producers can also determine their own production levels and prices, and establish their own branding.

"The salt monopoly is the toughest in China. There are several state enterprises in the petrol or telecommunications industries, but there is only one in the salt industry," said Shanghai-based lawyer Zou Jialai, a long-time advocate against the salt monopoly.

The China National Salt Industry Corp (CNSIC) now decides production levels, prices and distribution channels, issuing permits to about 100 companies, allowing them to produce salt.

It is also the only entity allowed to sell salt for household consumption through wholesalers set up and run by salt administration agencies across China. That means China Salt is the only brand in the market.

Under reforms announced on Thursday last week, the government will allow cross-region distribution, and licensed producers can become wholesalers to raise competition and lower prices for consumers. Salt producers can also determine their own production levels and prices, and establish their own branding.

Analysts are cheering the policy tweak, which comes after at least five previous attempts since 2001 to dismantle a monopoly running since the 7th century BC, when emperors sought to protect the salt trade - their key income source.

Although the salt trade now accounts for only 0.04 per cent of government income, reforms to dismantle the monopoly were reportedly resisted by groups with a vested interest, especially the CNSIC.

Supporters of the monopoly said it has helped ensure the distribution of iodised salt, which is necessary for healthy brain development.

To enforce the monopoly, China set up a "special police force" in 1994 to crack down on the illegal production and sale of non-iodised salt. In 2013, Taobao banned salt sales because it could not tell if the sellers had permits or if they were cross-region sales.

Critics blame the monopoly for the high price of salt. The cost price of table salt is reportedly around 200 yuan (S$42) a tonne but it retails at between 5,700 yuan and 7,500 yuan a tonne. Mr Zou, who has represented private firms against salt administration agencies for the right to sell table salt, said the need to distribute iodised salt dropped as the country's logistics network improved.

"People living in the coastal region have easy access to iodine-rich seafood, and a lower need for iodised salt. There is no need for a cookie-cutter policy that limits the consumers' freedom of choice," he told The Straits Times.

"Hopefully, the reforms will lower the price of non-iodised salt and make it more widely available," said Mrs Serena Yang, 42, whose mother has hyperthyreosis, which can be triggered by excessive iodine.

•Additional reporting by Carol Feng

A version of this article appeared in the print edition of The Straits Times on May 14, 2016, with the headline 'China prepares to dissolve salt monopoly'. Print Edition | Subscribe