---
title: "Most Companies That Rushed Ahead Since Salt Reform Have Become Cannon Fodder"
description: "Since the salt industry reform, some wholesale enterprises have suffered losses of about 40%, while production enterprises have lost 10%-15%. In the fierce competition, the first year of the reform has passed, but cross-regional operations are frequently blocked, and the separation of government and enterprise remains a key challenge."
author: "郭煦"
publisher: "New Distribution"
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published: "2018-02-10"
language: "en"
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# Most Companies That Rushed Ahead Since Salt Reform Have Become Cannon Fodder

> Since the salt industry reform, some wholesale enterprises have suffered losses of about 40%, while production enterprises have lost 10%-15%. In the fierce competition, the first year of the reform has passed, but cross-regional operations are frequently blocked, and the separation of government and enterprise remains a key challenge.

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Since the salt reform, some wholesale enterprises have suffered losses of about 40%, while production enterprises have lost 10%-15%.
In the fierce melee, the first year of the salt industry system reform has passed. In May 2016, the State Council issued the "Salt Industry System Reform Plan" (hereinafter referred to as the "Plan"), which opened the curtain on China's salt reform. The core content of the Plan shows that since the implementation of the Plan on January 1, 2017, salt product prices have been liberalized, the salt transport permit has been cancelled, designated salt production enterprises have entered the circulation and sales field, wholesale enterprises have carried out cross-regional operations, and market entities have become diversified.
The thousand-year-old salt monopoly system has thus changed. After breaking the monopoly, people have gained the right to choose different salts, while salt producers have gained autonomy in production and operation.
"Following the reform path, salt quality has improved, prices have become more reasonable, and the original imbalance of interests caused by policy will reach a new balance. This is the original intention of the reform," a local salt bureau director said in an interview with Xiaokang magazine. He said that the original major interests were in the salt companies (i.e., wholesale enterprises). After the interest pattern was broken, with incomplete reform, resistance from vested interests is inevitable.
While the salt reform has achieved results, it has also spawned some problems in the face of fierce market competition. Traditional salt wholesale enterprises have seen a sharp decline in efficiency, and some even face survival difficulties.
At the same time, due to incomplete reform, imperfect policy design, inadequate implementation, and the chain of interests involved, cross-regional operations have been frequently blocked. A large number of foreign-province salts have been seized, sealed, and removed from shelves by local salt bureaus. Some provincial salt bureaus have exhibited uncivilized and non-standard law enforcement in the process.
Industry insiders said: "The road of salt reform will be long, because production enterprises, including wholesale enterprises, have poor understanding of the market. At the same time, governments at all levels pay insufficient attention to the salt industry, and chaos will continue for some time in 2018."
Cross-regional operations frequently blocked
A reporter learned that since January 1, 2017, the Plan has been formally implemented. Among them, January 1, 2017 to December 31, 2018 is the transition period for salt reform. According to the Plan, the reform focuses on four aspects: First, reform the regional restrictions on salt production and wholesale. Allow production enterprises to enter the circulation and sales field and carry out cross-regional operations. Second, reform the government pricing mechanism for salt. Liberalize ex-factory, wholesale, and retail prices of salt, allowing enterprises to independently determine prices based on factors such as production and operation costs, salt quality, and market supply and demand. Third, reform the management of industrial salt transportation and sales. Liberalize the market and prices of small industrial salt and salt products. Fourth, reform the salt reserve system. Establish a social salt reserve system composed of government reserves and corporate social responsibility reserves.
The Plan clearly states that from January 1, 2017, all salt product prices will be liberalized, the salt transport permit will be cancelled, existing designated salt production enterprises will be allowed to enter the circulation and sales field, salt wholesale enterprises can carry out cross-regional operations, and provincial-level and below salt wholesale enterprises can operate independently across regions within their own province (autonomous region, municipality).
However, after entering the transition period in 2017, incidents of blocking cross-regional sales occurred in many places, and a large number of foreign-province salts were seized, sealed, and removed from shelves by local salt bureaus. The industry believes that this reflects the interest pattern behind it and is the biggest resistance to the entire salt reform. "I think this is a counterattack by vested interest groups, trying to win time for local enterprises through such blocking behavior and further consolidate their territory," said a management person from a salt enterprise.
A sales manager of a salt chemical company in Hubei told reporters that according to incomplete statistics, so far, the company's salt products have been inspected 157 times in Jiangsu, with nearly 600 tons of salt seized. The main reason is against retail stores, citing violations of Article 10 of the "Salt Monopoly Measures", which stipulates that the state implements a wholesale license system for salt wholesale. And Article 14, which stipulates that salt retail units, entrusted salt retail individual businesses, purchasing and selling stores, and units using salt for food processing should purchase salt from local enterprises that have obtained salt wholesale licenses. Salt bureaus in various places in Jiangsu have taken measures such as registering and preserving first, or even confiscating or fining. For those "suspected of illegal operations", the grassroots salt bureaus in Jiangsu do not explain any reason, only letting salt enterprise staff view relevant documents.
After the salt reform on January 1, 2017, production enterprises like Sichuan Chiyu Salt Products Co., Ltd. (hereinafter referred to as Chiyu Salt) gained autonomy and were no longer constrained by planned indicators. "In this year's sales season, trucks from outside came in a long line to pull salt, all waiting for workers to work overtime," said Zou Chenghua, the company's chairman, saying he was both happy and worried. Happy because such a hot scene was unprecedented, which they hardly dared to imagine before the reform; worried because after these trucks of salt leave Sichuan, their fate is uncertain.
Chiyu's salt has been seized, intercepted, and removed from shelves by local salt bureaus in multiple provinces. According to incomplete statistics, in 2017, Chiyu Salt was seized up to 1,000 tons in Yunnan Province alone. Chiyu's experience is not an isolated case. In the past year, cross-regional operations of salt production enterprises from multiple provinces have been frequently blocked. A large number of enterprises' edible salt was seized, destroyed, sealed, and removed from shelves after entering Jiangsu, Yunnan, Henan, Shandong, and other provinces. Marketing personnel were injured or even detained on charges of illegal business operations.
During the transition period, salt wholesale enterprises (including designated salt production enterprises that have obtained salt wholesale licenses) can carry out salt sales activities by building their own logistics systems or signing distribution contracts with third-party logistics companies to distribute salt to supermarkets, sales outlets, and units engaged in food processing, catering services, and other end users of salt; establish branch companies to conduct salt sales business, but the branch companies must not entrust units or individuals without salt wholesale licenses to carry out business activities; establish sales outlets to directly conduct salt sales business; and conduct salt sales business through existing channels.
According to the "Notice on Doing a Good Job in the Work Related to Designated Salt Production Enterprises Entering the Salt Circulation and Sales Field and Salt Wholesale Enterprises Carrying Out Cross-regional Operations during the Reform Transition Period" (MIIT Office Joint Consumption Letter [2016] No. 585) issued by the General Office of the Ministry of Industry and Information Technology and the General Office of the National Development and Reform Commission, in order to facilitate the performance of regulatory duties by relevant departments, salt wholesale enterprises should proactively inform the provincial salt industry authority of the sales location of 8 items of information when carrying out cross-regional operations. The provincial salt industry authority should publish the 8 items of information on its official website within 3 working days of receiving the notification, and must not refuse to publish for any reason.
A reporter verified that since the formal implementation of the Plan, in Henan, Anhui, Jiangsu, Guizhou, and other provinces, there have been acts of seizing foreign-province salt flowing into the local market. The reason for seizing salt is basically "suspected illegal operations", based on the "Salt Monopoly Measures".
Meng Wei, spokesperson of the National Development and Reform Commission, publicly criticized that after the salt reform, local protectionism still exists. Some local salt bureaus set up administrative barriers to prevent foreign salt from entering the local market, and even some local salt bureaus publicly issued documents for local protection.
"When the salt reform plan was introduced, the relevant legal provisions were not amended accordingly, and the regulations were not matched," said a local salt bureau director. "Now it is equivalent to having nothing except the salt reform plan, and the original salt industry management regulations under the monopoly system have not been abolished to this day. This is the crux of the problem."
Understanding the market determines enterprise production capacity
Industry insiders analyzed that the main reason for the above problems is that the "Salt Monopoly Measures" promulgated by the State Council in 1996 and the salt industry management regulations of various provinces are still effective after the salt reform.
Although the Plan clearly stipulates that designated salt production enterprises can hold salt wholesale licenses (valid until December 31, 2018) issued by the provincial salt industry authority of their own province (autonomous region, municipality) to enter the salt circulation and sales field and operate independently across provinces (autonomous regions, municipalities), in the past year, many provincial salt bureaus still obstructed the cross-regional circulation of salt products based on the "Salt Monopoly Measures" and provincial salt industry management regulations.
The "Salt Monopoly Measures" stipulate that the state implements a wholesale license system for salt wholesale. Salt retail units, entrusted salt retail individual businesses, purchasing and selling stores, and units using salt for food processing should purchase salt from local enterprises that have obtained salt wholesale licenses.
According to the above provisions, cross-regional circulation is suspected of illegal and non-compliant operations. The aforementioned local salt bureau director said in an interview with Xiaokang magazine: "Before the old regulations are abolished, the local salt bureau's law enforcement should be based on evidence. At most, it can be accused of using excessive means in the enforcement process."
But in the eyes of industry insiders, this violates the spirit and original intention of the salt reform. The salt factories whose products were seized also filed lawsuits against local salt industry authorities.
In April 2017, the National Development and Reform Commission and the Ministry of Industry and Information Technology issued the "Notice on Further Implementing the Work Related to the Salt Industry System Reform" (hereinafter referred to as the "Notice"), which proposed four major tasks: fully and accurately implement the spirit of the salt reform, promptly improve the local salt-related legal system; accelerate the separation of government and enterprise, improve the specialized supervision system for salt; implement the cross-regional operation policy of the salt reform, actively release market vitality; carry out special inspections on salt quality and safety to ensure the safety of the people's salt.
The Notice requires provincial, autonomous region, and municipal people's governments to resolutely cancel administrative approval items that do not conform to the spirit of the Plan, such as salt transport permits and salt retail licenses.
"But if new regulations and laws are not introduced, this chaotic situation will be difficult to change," revealed the aforementioned salt bureau director. "The relevant national departments originally planned to complete the revision of the salt industry regulations by the end of 2017, but now it seems impossible. This chaotic state will continue for some time in the future. The slower the revision, the more obstacles in the market."
A reporter learned that during the transition period, although the above problems existed, some results were achieved, but new problems also emerged. Traditional salt wholesale enterprises saw a sharp decline in efficiency, and some even faced survival difficulties. The reason is that the reform brought the salt industry from a monopoly stage to a competitive stage, breaking the original monopoly pattern and causing a significant drop in salt prices. Facing fierce market competition, efficiency declined sharply, so some enterprises had difficulty surviving.
It is understood that since the salt reform, some wholesale enterprises have suffered losses of about 40%, while production enterprises are relatively better, between 10% and 15%.
Since the salt reform, private enterprises that were once in difficulty have benefited from the reform. Compared with the personnel burden of state-owned enterprises, private enterprises carry relatively lighter debts and burdens. The salt reform is an opportunity for private enterprises.
Chiyu Salt, as a private enterprise, currently has a production capacity of about 500,000 tons. "Before the salt reform, the possibility of full production basically did not exist," said Zou Chenghua, chairman of Chiyu Salt. Under the monopoly system, each enterprise had specified transportation indicators. As one of the 99 designated salt production enterprises in the country, Chiyu Salt, a private enterprise, had an annual indicator of 55,000 tons of edible salt, and the only cities it could transport to were Zigong, Dazhou, and Mianyang. After the salt reform, it can operate across regions, and its sales areas have spread to more than a dozen provinces outside the province. "It was probably only enough to produce for two or three months, and the rest of the time was basically shut down. The more shutdowns, the more severely the production equipment corroded, and the higher the maintenance costs. On the other hand, the enterprise personnel were also very unstable, because most of the time they were idle, they could only get basic wages, making it difficult to retain people," Zou said.
Under the planned economy system, production enterprises were only responsible for production. After the salt reform, they will face some challenges. Yang Yukang, vice chairman of the Zigong Municipal Committee of the Chinese People's Political Consultative Conference in Sichuan, said: "For production enterprises, they will face the challenge of reshaping circulation channels. This is a challenge. They can use intermediate channels and other channels to operate across regions, but they will also encounter obstacles."
"The salt bureau under the original monopoly system lost its enforcement power after the market was liberalized, but it still implemented regional blockades. This right, in actual operation, has a disguised left, so the first step of the reform is not thorough," Yang said.
It is understood that in 2016, China's raw salt output was 63.095 million tons, but edible salt accounted for 9%, and salt production capacity exceeded demand by more than 20%. At the same time, industrial salt has had a certain impact on edible salt. Since enterprises producing industrial salt can also produce edible salt, the standard gap between the two is small.
Among more than 130 salt factories nationwide, most produce industrial salt. So far, industrial salt and edible salt have not been strictly separated. In Yang's view, China's salt should be liberalized, and industrial salt can be fully liberalized. "Edible salt and industrial salt should be managed separately. At the same time, the layout of production capacity should also be scientific."
"After the salt reform, in addition to cross-regional operations, we have also formed good cooperative relationships with some provinces, achieving a win-win situation. Shaanxi and Guizhou have become the main provinces for cross-regional operations. At present, the company implements a differentiated route, with salt products in high-end, mid-to-high-end, and low-end categories," Zou told reporters.
Industry insiders said: "Due to overcapacity, the adjustment of production exceeding sales is relatively sharp. According to national requirements, about half of the enterprises should be gradually eliminated in 2018." At the same time, enterprises have an incomplete understanding of the market, and all have flooded into the market, presenting a chaotic scene.
Separation of government and enterprise and the decisive battle of interests
Since the salt reform, why have cross-regional operations been frequently blocked? Professor Wang Keshan of Beijing Wuzi University said that the salt reform cancels the regional restrictions on salt production and sales, which means a change in the market pattern. Cross-regional operations will inevitably lead to the redistribution of the original cake. New entrants come for profit, and original market occupants defend for profit, so conflicts are inevitable. Policy formulation should be orderly, easy to understand and operate, and avoid vague conflicts. Otherwise, market entities will act according to their own understanding, and regulators will find it difficult to grasp the scale.
A reporter learned that in some provinces, the Salt Administration Bureau and the Salt Company are two brands with one set of personnel. The general manager of the salt company also serves as the director of the salt bureau, acting as both athlete and referee. Facing the influx of foreign-province salt, it will inevitably affect the interests of the salt company. Therefore, they set up layers of obstacles to the entry of foreign salt into the local market. Thus, the separation of government and enterprise seems to have become a key step in implementing the salt reform. At the same time, the salt bureau enforces the law based on the "Salt Monopoly Measures".
According to the documents of the National Development and Reform Commission and the Ministry of Industry and Information Technology, if the provincial, municipal, and county-level salt industry authorities and salt companies have not been separated, the separation of government and enterprise (or institution and enterprise) should be achieved by the end of 2017. From the current situation, the situation in various places is not optimistic, and the degree of completion may not reach the ideal state.
"The main problem with cross-regional operations is that the lack of separation of government and enterprise leads to non-standard business behavior. The system design of separating production and sales creates conflicts of interest between production and sales. Salt production enterprises cannot directly enter the market, thus lacking the enthusiasm for independent innovation. The regional segmentation in operation leads to low efficiency," Wang said.
Industry insiders said: "The reason for the frequent obstruction of cross-regional operations is that there is a chain of interests between the salt company and the salt bureau. The most critical factor is the incomplete supporting national policies. In the past, the salt company exercised some administrative functions because administrative funds were allocated through market operations. Now that its own interests have been impacted, there will be counterattacks. This is a historical continuation or a result of policy design." Regarding how to adjust the interest conflicts caused, Professor Fan Weihong of Southwest University of Political Science and Law, legal advisor of Zigong Chiyu, told reporters: "Zigong Chiyu encountered obstruction when entering some areas of Yunnan. Through negotiation with the local salt bureau, the salt bureau finally purchased the seized salt products at a low price."
A staff member of a salt bureau said: "According to the law, we try not to punish or investigate, and give enterprises a reasonable price to purchase these salt products. But this can only play a temporary adjustment role, not in the long term, because there is no policy basis."
How to better solve the resistance encountered in cross-regional operations? The most critical thing is the separation of government and enterprise. Separate government and enterprise, completely separate administrative power and management power, thereby solving the problem of interest conflicts. "Through the separation of government and enterprise, through unified market-oriented operation, salt production enterprises will gradually change this situation when facing the market," said industry insiders.
According to the "Notice" issued by the National Development and Reform Commission and the Ministry of Industry and Information Technology, if the provincial, municipal, and county-level salt industry authorities or salt quality safety management and supervision agencies have not been separated from salt companies, the salt industry supervision system reform plan should be compiled by June 30, 2017, and the separation of government and enterprise (or institution and enterprise) should be achieved by the end of 2017.
"By the end of 2017, basically all can complete the separation of government and enterprise, but the situation in various places is not optimistic, and the degree of completion has not reached the ideal state," said the aforementioned local salt bureau director. "The separation of government and enterprise requires that the administration do administrative things and enterprises do enterprise things. But originally, in most provinces, the salt industry supervision function was undertaken by the salt company. These people do not have administrative establishment. When the salt industry supervision function is transferred to the Food and Drug Administration, the people cannot go over, which becomes a problem. Now all provinces are thinking of ways, some organize overall examinations for conversion, some directly give administrative establishment, and some let them retire early."
Regarding the situation in 2018, industry insiders told reporters: "The situation will be more severe. The later the policies and regulations are introduced, the more unfavorable it is for the development of production enterprises. The reason is that the original salt companies benefited from the monopoly policy, and their blood can still be replenished. Although it has shrunk now, it can still support. By 2018, consuming the accumulated capital in the past, theoretically it will be more differentiated, unless supporting policies are introduced to implement diversion."
Article from: Xiaokang Magazine.


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