SALT  MONOPOLIES  - CHINA

" The foreigner coming to China earlier in this century would be struck by the care with which salt was treated in the countryside. Salt was a government monopoly, heavily taxed and therefore expensive."   T.R.Tregear. 

First mention of salt in China is found in the annals of the Emperor Yu, BC 2205-2197 , who ordered the province of Shantung to supply the court with that commodity During the Chow dynasty the administration of the salt industry was conducted by court officials but the Crown monopoly of salt was not instituted until the days of Kuan Chun who died in BC 645. Between AD 561 and AD583 references to various taxes on salt lead us to the conclusion that salt was produced at that period from sea water salt marshes and salt springs and at the present day salt is produced in China in three varieties sea-salt, lake salt, and well salt . 

A government monopoly in China stretches back over a period of about 2,500 years. Not only was salt production more sophisticated at an earlier age than in other parts of the world but the monopoly was often more effective. The country's needs and dependence on salt varied considerably at different times. When Emperors and the authorities were strong and able to expand their control over the provincesthe salt monopoly was both the means of establishing political power and also financing their hegemony. 

 

MONOPOLIES 3 - CHINA

 THE SALT SOURCES 
Saltmaking is a very ancient industry. More than 4,000 years ago the Chinese were boiling down brine in small pans from saline soil in desert basins and relatively dry areas where the rainfall is not sufficient to wash the salts away. Salt pools and patches of alkaline earth around the Great Bend of the Huang Ho - Yellow River - are the most important in the north west: the most extensive and productive - 75% of the total output - lie in Kiangsu Province and along the full length of the coastal strip. Qinghai lake China's largest salt lake at 4580 sq/km, is today again to be developed [together with another ancient salt producer [today the "Dead Sea WorksLtd] into a rich resource for salts including potash,  Qinghai province has another 27 salt lakes located inthe "Caidam basin" known since ancient times as "The Treasure Bowl"


Szechuan province in the south west exploited its salt-well technology before the Christian era including blast furnaces to smelt iron and steel bits able to bore holes up to a depth of 2,000 feet. Brine, brought up by bamboo tubes with leather valves pushing and sucking was carried away to be boiled in large iron pans using natural gas for fuel. About the same time, the Egyptians transported their brine in wooden pipes, a technique only attempted in Europe during the 17th century. The Chinese could use bamboo, hollowed out and joined together to provide an algae free, rot resistant piping.

 


Evaporation pans at various stages of brine concentration - the brine flowing from the drill holes "welling" up into the ponds,  and finally heaped mounds of salt dry and ready for collection


AN EARLY STATE SALT MONOPOLY
Between 685 and 643 BC. Ch'i state - modern Shantung - rose to power mainly through 'an advantageous' trade in fish and salt. Its salt pans were 'treasures of the state' - nationalised - and seem to have been the chief source of natural wealth around 520 BC. Salt pans and forges were the principal industries its factories turning out agricultural tools such as hoes and ploughs and, because war was endemic, weapons for the army, the rebels and smugglers all struggling for power. After a period of ruinous inter-state warring and social upheaval China became 'unified' first under the Ch'in dynasty and then under the Han Emperors from 202BC. to 220 AD. with a centralised monarchy and a loose federation of overlordships in the 'One Empire under Heaven.' A new social structure allowed peasants to own land and an economy which used money began to evolve from one based on


Drilling rig circa 300AD   The same rigs drilling for salt in Texas nearly 1800 years later were instrumental in finding crude oil.


agricultural products. After grain, salt and iron were the two most important necessities in the ancient Chinese empire at this time. But by 120 BC the Treasury was exhausted. 

Taxes had risen, there was widespread illegal minting of money and grain shortages had forced up prices. In some parts of the country even salt became too expensive to buy. During the same year an attempt was made to reduce inflation and to curb the 'nimble traders and unscrupulous merchants' by setting up a salt and iron monopoly to cover a far great area than the Ch'i government had so successfully done. Hsien Yang, a notable salt boiler and K'un Ch'in, a prosperous ironmaster were appointed assistants to the Minister of Agriculture. Although salt and iron were traditionally the responsibility of officials drawn from aristocratic families who often held other powerful government position concurrently - this particular minister was also head of Commerce and Finance departments - it was a deliberate policy of selection by merit rather than birth that led to their appointment. Offices and stores were opened between 117 and 115 BC. in an effort to 'equalize prices' by regulating the transport, storage and distribution.

Salt officials also competed with the merchants in the markets to buy cheaply when prices were low and resell at reasonable cost from government depots in times of scarcity. The new appointees, Yung and K'un travelled all over the Empire by post chaise of the '3rd category' - the price of a ticket - to


China; Artificially boiling brine


inaugurate the service and to recruit experienced tradespeople, often the former owners, 'already enriched' to run it. From 120 to 90 BC. rich industrialists and wealthy merchants built up prosperous monopolies on natural 'resources from the mountains and marshes' on coinage, salt and iron, steadily improving the revenue until around 100 BC. it was 'twenty times better.

DISCOURSES ON SALT AND IRON
But the discontent which followed these changes was reflected in a debate 'Discourses on Salt and Iron': the State Control of Commerce and Industry. The controversy, begun in 81 BC between the government School of Law, the political and philosophical wing of the former Ch'in dynasty, and the 'Litereati' traditionalists and followers of Confucius, it covered domestic issues, economic questions and above all, the ethics and philosophy of the time. The Legalists supported the nationalization of salt, iron and grain to prevent competitive greed and corruption among the merchants and to provide the steady, profitable revenue needed for national defence. As realistic statesmen in power they had to satisfy the Emperor and Court as well as balance the budget. The Literati appealed for the abolition of the salt and iron monopoly. Out of power and wanting to regain the Emperor's confidence, they had nostalgic leanings towards feudalism, deploring the unsettled state of the peasant farmers now liable for the new higher taxes. The ancients, they argued, had managed the land so that it was sufficient for people's needs ...'each was satisfied with his dwelling, customs, food and implements..' State interference in the markets would mean officials competing with private traders and the concentration of wealth in the government's hand might


Pipeline of hollow trees and bamboo


'discourage individual initiative . Furthermore, they were critical of diversified responsibility. '..No man in ancient times pursued two occupations at the same time...' In spite of the financial success of the Salt and Iron monopoly the political climate was changing and by 45 BC. the Confucian scholars were 'in almost complete control at the Han Court. The monopoly was abolished in 44 BC. but restored four years later during another crisis: and the pioneer commissioners continued their professional careers in the Ministry of Agriculture, K'un as Minister with Hsien as his assistant.

REORGANIZATION AND PROVINCIAL AUTONOMY
Four dynasties later the Empire was again in disarray. Central government in the provinces had broken down partly through over-stretching the resourses in attempting to conquer new territories. A bitter civil war - An Lu Shan's rebellion in 755 AD. devastated the north causing serious economic and social disruption. Under the T'ang Emperors 618 - 90 AD. the country was again unified and urgent fiscal reforms begun. The emphasis was again on indirect taxation of commodities, the most important one being the reintroduction of the Salt and Iron monopoly. 'Iron' was retained in the title out of respect for the former Han Emperors; it was the salt which made the money. Again, two able,energetic administrators took charge. Ti'wu Ch'i first, and then Liu Yen, created a system of directorates and commissioners to control the saltmakers, buy up their output and sell it taxed, sometimes
for as much as ten times the market value, to the merchants. More prudent than his Han predecessors, Yen opened offices and stores only in the salt producing areas because he felt that '...if the officials were numerous the people would be oppressed..' although this good intention was short lived, for as the monopoly grew in power, so did the bureaucracy. For even in relatively peaceful periods, the provincial governors might have army garrisons of between 20 and 90 thousand men doing non military duties in canal and river transport as well as local industries. Regulations for Military Colonies assessed the number of workers and graded production: civil regulations authorised the 'prefectural services' to manage the salt pools in the north with the instructions to rent them out to families who were skilled and capable of working them efficiently and appointing officers to inspect, supervise maintenance and repairs and to tax the salt produced. With salt manufacture, storage and marketing regulated to some extent, Liu Yen successfully negotiated a working agreement with the canal and river transport organization. The overhaul included dredging and maintenance - paid for out of the profits from the salt and iron commission - employment of professional crews for the boats and guards for the water traffic and storage bases along the routes. He also arranged sailing schedules for specific runs on canals or rivers with boats built to suit the local conditions. Bulk cargoes mostly went by water and here again, the Chinese led the West in marine technology by fitting bulkheads some 500 years earlier; and their river salt boats had 'preflooding' sections to cushion the damage from bouncing and crashing when shooting the rapids on the way down from Sechuan to the Yangtze valley.

 

THE POPULATION SHIFT FROM NORTH TO SOUTH
For many centuries, even before the Han Dynasty, there had been a population movement southwards. Here the land was more productive, the climate more temperate and a higher standard of life prevailed than in the harsher northern conditions. Yangchou, at the junction of the Yangtzee River and the Grand Canal was already established as the centre for the canal network and was ideally positioned for the amalgamated Salt Administration and the Transport Commission. It also became the economic center for the whole country. Liu Yen was made a commissioner for public revenues, salt and iron, taxation and transport in 763 AD. Two years later he and Ch'i were sharing the financial control of the whole country between them. Ch'i represented the Public Revenue Department, an important body in the Central Government responsible for the budget which took over the northern provinces and Szechuan, while Yen, as commissioner of the Salt and Iron Administration became dominant and powerful in the south. (Map) Financially it was immensely successful. In less than 20 years the Salt and Iron's contribution to the national revenue rose from 600,000 strings of cash to between 6 and 7 million strings - nore than half the annual income. (Table) But the high peak was not sustained. In the 780s there were serious uprisings in the north east and more money was again needed urgently. The salt taxes were raised - five fold in some parts of the country - a hardship made worse by continuing deflation and disorder in the Central Salt monopoly administration. Reform of the system produced an improvement in the revenue so that by 900 AD salt was the top item in the budget with the south of the country contributing the entire salt ration for the army. But during the next hundred years the number of soldiers increased from 200,000 to over a million so naturally the monopoly tax went up - three and a half times - since it was levied mainly to meet defence expenditure. About 60% of government money was spent on maintaining the forces. By 1160 the annual budget was 40,000,000 monetary units and the supporting taxes were salt 50%, wine 36%, and tea 7%. 

PAYING THE TAXES
Before the 10th century most taxes in China were paid in kind; typically, the land owner paid in grain and his wife paid with her woven cloth; or a number of families might combine to provide a soldier, a horse or some lengths of silk; the salt areas paid in salt. After 780 the land tax, first imposed in the state of Ch' in 594 BC, was assessed in cash with regional variations. The prosperous Yangtze delta, ahead of most other provinces responded by paying this and the poll tax in money.

PROSPERITY, POVERTY AND INVASION
Between 960 and 1279 AD. during the time of the Sung dynasty was a period of great trade expansion and growth in the economy with the introduction of paper money and more copper cash in circulation. (see chap on Money) It was a time of high interest rates - as much as 20% a month - and of poverty, especially among the employees in the state monopolies; for example, the 280,000 families working under semi feudal conditions in the Huai salt marshes. Culturally, it was also a distinguished epoch for town planning, landscape gardening, painting and of course, scientific invention. However, in spite of having the most technically efficient army in the world, it did not prevent China from being swept into the Mongol Empire towards the end of the 13th century. The invaders over ran much of the country with brutal fury but they agreed to a wise suggestion to 'set up taxation on land and merchants and make profits on wine, salt, iron and the produce of the mountains and marshes.'

A NEW MONETARY POLICY 


Their successors, the Ming Emperors, found themselves ruling over a much larger kingdom the any earlier dynasty with 3 million men in the army, many garrisoned on distant borders and in need of supplies. Merchants willing to transport grain there received salt certificates as pay in exchange for delivery which entitled them to trade the government salt at lucrative prices. They were also encouraged to colonize these outposts by farming the land. But surprisingly, in 1492, when payment was changed over to money instead of salt the merchants lost interest and stopped. Many were rich having '..commonly some hundreds of thousands of ounces of silver and the great traders of Huai-Chou in Kiangsi province might have made up to a million strings of cash through fish and salt..' so that their influence in government could no longer be ignored. As the key economic areas became settled and affluent - by the late 13th century 85% of the population and two thirds of the national wealth were located there - market towns sprang up along the Grand Canal and the main waterways with storage points and customs services to support the interegional trade. It was the chief center for mining, the textile and tea industries: and Szechuan, with its advanced salt technology and minting money skills was the first to introduce paper money as early as 1024 AD. 

IMPLEMENTING THE MONEY PROGRAMME: A MIXED ECONOMY.
There had also been a population swing away from the overwhelming proportion of the workforce engaged in agriculture with a fivefold increase in the numbers of people working in offices and about three times as many merchants as before. More taxes were levied in money including salt under a mixed economy of paper money and copper cash. '..everyone was obliged to go to market to sell and buy ... peasants poured into the cities to sell their products or become traders and artisans..' writes Balacz. There was more freedom to trade and increased decontrol in industry: the salt tax collection in money rather than the commodity had taken place around 1500 AD and after 1617 salt was no longer stored in government depots. The merchants too, along with the continuing evolution of the money economy had also prospered.

MARKETING THE SALT
Those 'odd, unsettled people ...the traders and merchants, 'with uncertain means of subsistence were ranked below the gentry, the peasant, the artisan and craftsman in a rigid social hierarchy based on birth and occupation. They were subject to personal harassment and traditonally forced to wear distinctive dress such as one white and one black shoe or to having their name and business displayed on their turban, which nowadays might be considered a good advertising gimmick but was then a humiliating sign of social discrimination. Extra transit dues, duties and registration were common penalties. The 'gentleman merchant' was usually a member of a gentry family having capital or a loan and typically working in the grain or salt monopoly business; but he could not own land or enter the civil service examinations except by illegal means and was therefore excluded from a government career.
After all,the salt and iron monopoly it was declared, had been introduced to 'crush' the rich merchants so as to prevent hoarding and illicit saltmaking However, during periods of prosperity and decentralisation in the provinces, the restrictions were relaxed and merchants could buy themselves into a business or industry. One such opportunity occurred in 1644 when the Ch'ing authorities appointed 24 wealthy merchants to manage the transport organization giving them important hereditary rights to licences and control over the smaller traders which seems to have been unusual and was perhaps an acknowledgement of the influence and social status achieved by merchants at this time. The transport organization, much of it already in private hands, could offer great opportunities for enterprise and profit; and so could the salt monopoly though both were very vulnerable to abuse.

THE SMUGGLERS
Salt smuggling was always endemic and widespread in China as it has been elsewhere in the world. The outstanding reasons were, briefly, the rather severe regulations governing the shipping of cargoes; lack of economic incentives; a larger volume of trade giving greater opportunities for illicit saltmaking and illegal sales. Violent plunder increased when both shippers and bandits were armed and influential people with vested interests in the salt industry failed to demand investigation and reform.chiao01.jpg (13301 bytes)

EXPLOITING THE SALT
The salt monopoly was run on a complicated system of quotas, licences and certificates with different gradings and marketing outlets - inland the tax was higher than at the coast for example - not to mention tax free weighting, grain tribute ships carrying salt free of charge and fishing boats which had their own legal allowances. There were plenty of loopholes to be exploited: and they were. A shipping publication in Ming times carried warnings about short measure, false returns and corrupt practices for every type of cargo and 'any number of sly frauds ... such as drilling holes in kegs of oil or purposely shift(ing) government monopoly salt about looking for an opportunity to steal it .. so there is no bag which escapes being pilfered ..' Low priced blackmarket contraband would be sent on its way through the canals by bribing transport officials to allow it on board and then turning a blind eye on its disposal at the end of the journey. Later in the 19th century, there would be gangs of 'as many as a 100 and several tens of men ...in the markets ... they load up their salt and openly display it for sale .. at about half the price of government salt. Or again, the Muslim folk ... along the sea coast in the Hopei province make a business of selling illegal salt .. 300 to 400 men use donkeys to carry their salt, calling them 'salt donkeys.'

A BRAVE ATTEMPT AT MITIGATION
But in 1892, one official, Tao Chou, did have some local success in a bid to stem this corruption at Liang Huai in the eastern coastal plain north of the Yangtze river. (Map). Production yards there covered a 1,000 sq. miles and employed about 400,000 workers, most of them with private or semi-private status - a large organization even by modern standards. In theory the management was shared between the Emperor, the Board of Revenue and the local authorities. In practice it was the local personnel together with leading wealthy merchants who were responsible. With official support and vigorous leadership Chou was successful in reducing salt smuggling on the canal boats and from the Liang Hui yards by searches and arrests. chi fula.jpg (12522 bytes)At least one bandit fleet ceased operations while he was in charge. He also achieved lower production costs by 'un-co-opting' some powerful merchants holding hereditary licences and replacing them with more modest, able and trustworthy men. He stimulated salt sales considerably and reduced the backlog of unsold quotas. But he was not able to get the price down low enough nor to stem the flow of illegal salt from over the borders of adjacent provinces. And he failed to keep pace with his current deliveries, so that his achievements in boosting the sales and efficient policing must be set against his inability to deliver on time.

CHINA IN THE TWENTIETH CENTURY 
At the turn of the twentieth century the salt trade was still a monopoly with the country divided into circuits; price differentials varied greatly and customers were limited to buying from licenced dealers in their own area. Duty and taxes were levied at the depots and in transit; private saltmaking forbidden and movement of salt from one circuit to another was regarded as smuggling. In a population which seems to have been around 400 million, the average adult salt consumption was about 9lbs a year - 3 lbs less than in T'ang times.
Nevertheless, it was a steady, reliable income good enough to be accepted together with the rapidly increasing customs as security for the foreign loans needed to 'modernise' China. One of the most important, the Reorganization Loan for #25 million, was raised by Britain, France, Russia, Germany and Japan in 1913 with the proviso that a number of foreigners should be appointed to co-operate with the Chinese in the Salt Administration management and to see that the revenues were repaid.
 The maritime customs duties on the other hand were predominantly foreign controlled since they depended on revenue for imports. But both were 'shielded from warlord interference by the treaty powers involved in their collection ...' Trade was booming and by 1917 the customs revenue was strong enough to carry the loan repayments with only nominal participation by the salt administration The trend towards privatization in 'modern China' had continued, so that by 1950 only one third of the salt industrial works were state or co-operative owned; the rest were private businesses. Ten years later the wheel had turned full circle and 98% were in the public sector. And China was the second largest world producer of salt.
The salt monoply in China was an integral and intimate part of the organized state from early times. The industry successfully applied advanced technology to exploit deep drilling, lifting and piped transport from their brine well long before the Western world. Financially, the monopoly raised significant amounts of revenue for wars, rebel movements and state enterprises and in doing so created employment but much hardship for the poorer sections of the population as well as serving the long standing interests of eminent persons. And it took part in the 'moderniization' of China in the 20th century.

Now, the tax on salt is used as it should be, to regulate the price between user and producer throughout the republic. 

Research shows salt was lifeline in history

Three Gorges Reservoir

Salt was for a time the lifeline for social and economic development in today's Three Gorges' Dam area of the Yangtze River,China's longest, said researchers after a recent tour to ancient salt processing centers in the area.

The researchers, including archeologists and historians, have collected enough cultural heritage items and specimens to explain how salt was processed and distributed in the region in history.

"Many wars were fought in the area over the control of salt resources," said Wang Chuanping, an official in charge of archeological excavation and heritage protection in the region.

Salt has always been the lifeline in China's history, said Prof.Ge Jianxiong with the Shanghai-based Fudan University. "Whoever controls salt has the power to decide his own fate and that of all others," he said.

The Three Gorges' Dam area, where brine springs abound, used to be a center for salt processing and distribution. Experts have unearthed a huge amount of chinaware pieces in the region, which they believe were used for salt processing and storage.

"The rich salt resources in the Three Dams also helped the great ruler Ying Zheng, the first emperor of the Qin Dynasty (221 -207 BC), to unify six rival states into one country and establish a form of government which had a lasting influence on Chinese feudalism," said Prof. Ge.

Archeologists have been racing against time to rescue cultural relics facing submersion under the Three Gorges Reservoir, turningthe area into the world's biggest archeological worksite.

China was linked with other parts of the world mainly through two routes in ancient times. One was the Silk Road in northern China. It started from Chang'an, or present Xi'an City, and went westward to central Asia through Xinjiang. The other was the Cha Ma Ancient Road in southwest China. It transported tea, grain and salt on horse back all the year round.


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