The salt monopoly, Chen pointed out at the time, was defective in three ways: first, the separation between government and enterprises was lacking; second, the salt monopoly system extended down to small salt companies; and third, firms producing table salt were being kept from the market economy. Reform of the industry, he concluded, was therefore imperative.

The Salt Industry Association and China Salt responded to these criticisms shortly after. In December 2009, the Salt Industry Association’s Secretary-General Song Zhanjing attended a meeting held in Nanchang, Jiangxi Province, by the Association and 28 major companies. There he raised a two-step draft reform. The first step was to reform the existing table salt monopoly structure, launch three-year franchises, and abolish planning and state-set prices or implement national guidance prices instead. The second step was comprehensive marketisation.

In June 2009, General Manager Mao Qingguo, addressing those who give credence to rumoured price hikes and buy and hoard salt, stated on CCTV that China Salt guaranteed price stability and adequate supplies of table salt. While he stressed the role of State-Owned Enterprises (SOEs) in ensuring stable supplies, he also sought to contain criticism of the salt monopoly institution.

The salt monopoly originated during the period of Emperor Wu (BC 144-88) of the Han Dynasty and would be a significant historical feat to abolish. The response of consumers to proposed reforms has been surprisingly cool. A survey conducted by the Sina portal showed that 65 per cent oppose repeal of the salt monopoly. Consumers support the monopoly because they worry that the stable price and quality of salt could not be maintained without it. Some 58 per cent of those surveyed believed that price hikes would follow reform. Market-oriented reforms have led to increased utility costs in the past. This has led the general public to equate pricing liberalisation reforms with price hikes, whether or not the reforms are due to market supply and demand.

There are fears that the quality of salt will deteriorate once production and sales are liberalised. Over 400 million people in China consume insufficient amount of ,iodine. As a result, the government requires salt to be iodised. But following liberalisation, firms that produce and sell non-iodised salt could increase. Some illegal manufacturers have used industrial salt as table salt to cut costs in the past.

Reform of the salt monopoly is opposed due to the average consumer’s ‘reform angst’ regarding the side effects of economic restructuring. The 1980 reform of the production and distribution system received strong popular support, but reforms in education, medical care and housing during the 1990s, although achieving significant results, also brought about the degradation of the quality of commodities and services. These side effects have been increasingly evident in recent years, leading consumers to oppose new reforms.

One example.is the housing reforms implemented in the mid-nineties. These improved the living conditions of much of the population and enabled a rapid expansion of the real estate market but the lack of timely, cheap public housing made the lower and middle classes feel over-burdened.

The people of China understood and supported the early reform era, but the government today, after 30 years of reform experience, needs comprehensive and thorough reform programs that reduce the consumer’s anxieties about price hikes and avoid the side-effects caused by hasty reforms.

Sun Tianfu is the China representative of Chinalyst Advisory Consulting (Japan) and writes here at Caijing.

This essay was translated by Dr David Kelly and an earlier version appeared as Sun Tianfu, ‘Huan gaige youyuzheng, dacheng xiaofeizhe fandui feichu qiannian shiyan zhuanying zhi’, in Weekly Toyo Keizai on 6, February 2010.