Beijing prepares to dissolve ancient grip on salt market

[BEIJING] From Sunday, China's long campaign to make sprawling state-owned industries more efficient will stretch beyond commodities like coal and steel into one of the most ancient markets of all - the salt trade.

As of Jan 1, almost 80 salt producers and traders from across China will be able to sell their wares in Beijing for the first time ever. The capital is implementing plans drawn up earlier this year by central government to dissolve a monopoly that goes back centuries.

As part of its liberalisation commitment, the government has said it will encourage consolidation among sales wholesalers and producers - there are more than 2,000 salt makers in China, according to the China Salt Association - as well as the injection of private cash into state-controlled firms. "The salt industry will be consolidated in the coming years," an industry regulator told Reuters, requesting anonymity. The regulator declined to say how many salt makers might be merged or shut down.

Under new rules published by Beijing's Municipal Commission of Commerce this week, some 79 registered traders from other provinces who will be allowed to enter the city's market alongside 16 Beijing-based wholesalers.

The capital is one of 13 cities and provinces stretching from Tianjin to Inner Mongolia that have received approval from central government to open up their edible salt markets to other regional producers and wholesalers who were previously restricted to operating in their local areas. Other regions of China are awaiting the green light to do the same.

The changes are designed to dismantle price controls and distribution channels in a business dominated by the state-owned China National Salt Industry Corp, which had revenue of 21.25 billion yuan (S$2.5 billion) in 2015, down from 32.43 billion yuan a year earlier, according to an online company statement.

One of its subsidiaries - Beijing Salt Industry Corp - currently controls the capital's salt market.

Until now, salt producers have sold their wares to state-owned distribution companies. China produced 88 million tonnes of salt last year, 10 per cent of which was edible salt, according to the China Salt Association, the rest being snow-melting industrial salt.

The government has said it will monitor the market and intervene to stabilise prices if anomalies occur. The authorities will also ensure stocks are available to support demand for at least one month.

No new licenses for producers or wholesalers will be granted to edible salt market until the end of 2018, the central government has said.

REUTERS