State finance, merchant stake, and foreign interests: The certificate system in the Chinese salt administration, 1912–1949

Abstract

The certificate system was a tax farming system that originated in the imperial era. During the Republic of China (1912–1949) the practice largely continued, despite being much criticised. Aiming to explore how and why the system was able to survive until the late 1940s, this article addresses three related issues: the role of the foreign-managed Chief Inspectorate of Salt Revenue in the Chinese state finance, the fiscal relationship between the central and provisional/local governments, and the interactions between the state and salt merchants. These factors contextualise the resistance of salt merchants against the abolition of the certificate system. The Chinese state did not abolish the system due to a concern about possible disruptions to salt revenues. During the wartime Japanese occupation (1937–1945), the concern became irrelevant, with the collapse of the prewar salt transport and revenue collection-remittance. After the war ended, the state simply ruled out a revival of the system.

Keywords:

• Chinese salt administration
• Chief Inspectorate of Salt Revenue
• certificate system
• salt merchants
• central-provincial fiscal relations
• surtax
• Nationalist Government
• Second Sino-Japanese War

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 ‘Salt merchants’ in Chinese (yanshang) covered at least seven groups who played different roles in the process of salt production and distribution (see Adshead, 1970, 157–158). This study focuses on the merchants who acquired certificates with monopoly rights over certain shipping routes and sales markets.

2 For more on local elite activism through public associations in the late Qing and Republican eras, see Bergère (1992), Goodman (1995), Bun (2001), and Xu (2001).

3 To a degree, the certificate system tended to perpetuate salt merchant groups as trade guilds (hang) bond together by contracts and rituals, as David Faure (2006) described.

4 The exchange rate between silver dollar (yuan/ ¥) and silver tael varied from time to time. When the Nationalist Government abolished silver tael as currency in 1933, one yuan officially equaled 0.715 tael. Yuan (¥) was written as dollar ($) in English sources of the time, meaning a silver or Mexican dollar.

5 As Tian Bin noted, the Qing paid the indemnities to Japan in silver taels and made loans in 1898 in British sterling; the devaluation of the latter in the subsequent years incurred significant losses for the Qing state.

6 This claim was true. In fact, not only native and modern banks but also the Qing government agencies were engaging in financial transactions with salt merchants in Tianjin that belonged to the Chang-lu salt division. See Bun (2001, 30–41).

7 For more on ‘good tax’ vs. ‘bad tax’ discourse at the time, see Xu and Xu (2016).

8 Zhuang Songpu, a member of the Legislative Council who participated in drafting the 1931 Salt Law, put China's population at 470 million; maximum possible sales of salt at 5.64 million piculs (average twelve catties per person); and possible salt tax revenue at ¥282 million (at the rate of ¥5 per picul or ¥0.60 per person) (see GYWH, 181; XTYZP, 47). This was a best-case scenario that few would believe was possible to realize by whichever methods of salt administration and taxation.

9 As the text in the source indicates, the amounts of salt revenues for 1914, 1934, and 1936 reflected the best times when the central government was able to receive the revenues from provinces, unlike most of other years that are not included in the source.

10 More damaging to state finance was the loss of the Maritime Customs revenue, which would help explain the wartime inflation noted below (see Boecking, 2011; Young, 1965;).

11 There are small discrepancies in the amounts of salt tax for 1914, 1934, and 1936 between Table 2 and Table 1, as they are from records in different government agencies.

12 It would take a separate study to examine the collaboration of salt merchants and the puppet regimes with the Japanese in occupied China during the war. In general, the Japanese approach to the economy in the occupied territories would switch from ‘simple plunder’ to ‘using the war to sustain the war’—resumption of production, including that of Chinese-owned enterprises (Coble, 2003, 33–49).

13 For more on the hyperinflation in 1945–1949, see Hu (1971) and Lu and Jia (1992, 381–476). The assets the GMD state took to Taiwan included gold in nearly 3 million MT, silver in nearly 10 million MT, and foreign exchange in around US$48 million and over HK$87 million (Li, 2005).