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Based on extensive archival research, Beyond Market and Hierarchy reconstructs how Fan waged modern China's war of salts. Led by his Jiuda Salt Industries, the nascent refined salt industry battled revenue farmers who, as a group, monopolized the production and distribution of evaporated salt.

Inhaltsverzeichnis

Frontmatter

Introduction

Abstract
Reviewing his work three decades later, Fan Xudong (1883–1945) declared that Jiuda, as the first-born of his industrial group, is truly a “Chinese-style” elder brother.1 Indeed, from 1914 until 1953 when it became a part of the joint state-private Yongli-Jiuda Chemical Industries, Jiuda Salt Refinery Co., Ltd. was synonymous with modern China’s refined salt industry. Building this private enterprise from scratch to national prominence, Fan and his colleagues promoted the country’s health championing the consumption of hygienic refined salt, self-sufficiency in various chemicals, and industrialization with an “almost religious … fervour.” 2 Beginning with a nominal capital of 50,000 yuan, by 1924 the company boasted a paid-up capital of 2.1 million yuan. With plants at Tanggu (Hebei), Dapu (Zhejiang), and the Yongyu Salt Refinery Co., Ltd. in Qingdao, Shandong, Jiuda controlled nearly half of the country’s refined salt production capacity by 1937. Through Hengfengtang, its holding corporation, the company owned over 100,000 mu (one mu approximately one-sixth acre) of salt ponds, Tanggu’s central mart and wharf, as well as partnerships distributing both refined and crude salt. Jiuda’s employees were socialized, whether as a family or a corporate unit (danwei) through a variety of institutions and measures.
Kwan Man Bun

1. The Institutions

Abstract
As part of the state- and nation-building enterprise, the role of salt and its taxation generated considerable controversy in republican China. This chapter traces the evolving debate as Yuan Shikai (1859–1916, president 1912–1915) and his successors struggled to assert central control while the Reorganization Loan of 1913 secured on the gabelle created a seemingly “colonial and bizarre” Revenue Inspectorate charged with the mission of both collecting the tax to ensure repayment of the loans and modernizing the system on the principles of free marketing, equity, efficiency, and simplification. The Weberian ideotypical bureaucracy—professional, insulated, and departmentalized—seemingly delivered.1 On the other hand, Esson Gale, among the inspectorate’s earliest foreign staff, remained equivocal in explaining the apparent success: Yuan Shikai’s military control of the provinces, inflation, or unknown revenue sources appearing “as if by magic.”2 Unraveling the secrets behind the gabelle growth, the competing interests of the central government, the provinces, officials, and warlords, as well as the foreign staff at the inspectorate (and the masters that they must serve) and resourceful revenue farmers all contributed to the continued morass that was salt (yanhutu). A steady flow of revenue became the guiding principle shaping not merely the institutions but also the salt business.
Kwan Man Bun

2. The Networks

Abstract
The turmoil that modern China underwent shaped Fan Xudong’s quest to save the country through industrialization. A native of Xiangyin, Hunan, he was the second son of a poor rural school teacher. After his father’s death, he lived in a charitable home for chaste widows with his mother before joining his elder brother Yuanlian (1876–1927) at the Hunan School of Current Affairs (Hunan shiwu xuetang) and followed Liang Qichao into exile after the failed Hundred Days Reform in 1898. With financial support from Liang, Xudong attended Okayama Number Six High School (Dairoku kōtō gakkō) and Kyoto Imperial University. After the 1911 Revolution, he hurried back to China to work as an assayer at the Bureau of Currency (Bizhiju), Ministry of Finance, where he soon became frustrated with the bureaucracy. He became involved in the salt industry when Zhou Xuexi, in preparation for reforms under the terms of the Reorganization Loan, dispatched him to Europe to study gabelle administration and salt refining in 1913–14.1 Hoping to practice what he had learned, Fan dropped his plan to pursue further studies in Europe and hurried home hoping to begin construction of the government-owned salt factory. The order, however, never came. With the prospect of reform dimming, he turned to private enterprise as instruments of change.
Kwan Man Bun

3. Breaking into the Market

Abstract
On May 13, 1923, Jiuda received from Li Yuanhong, one of its shareholders, a presidential citation for contributing to the people’s sustenance (minshi) and over 2 million yuan in gabelle annually to the country’s coffers. 1 This chapter analyses the reasons for Jiuda’s success and how it continued to wrestle with the institutions of the republican government, law, and the market. At times Kafkaesque, the saga of its progress unfolded with ironic twists and turns. Disagreements between them notwithstanding, Jiuda was saved, at least in part, by the synarchic Revenue Inspectorate. The descent of the country into political chaos, too, created both opportunities and crises for the company. In addition to a skillful blending of market, network, and hierarchy, Fan and his colleagues championed free marketing of refined salt with petitions and lawsuits while exploiting the different interests and factionalism within the salt bureaucracy as well as the division between the central and provincial governments. Drawing on their networks, influence (shili) could be exerted on officials to do nothing or decide in favor of the company, reinforced by goodwill (qingyi) invoked through network transitivity or manufactured by rent creation. 2 When the strategy failed, the company resorted to bribery. To secure Jiuda’s place in the heavily regulated and imperfect salt market, Fan’s entrepreneurship skill includes not merely managing the company, but also mastery of the economics of regulation, rent extraction, and political extortion.
Kwan Man Bun

4. The Price of Success

Abstract
Once Jiuda breached the barriers of entry and reaped the profits of institutional innovation, other refineries soon appeared. Although not every attempt was successful, the industry grew. But while Fan Xudong and his colleagues celebrated the development as an encouraging sign of the country’s improving hygiene and free salt trade, they soon found Jiuda paying the price of success. As the country continued its descent into political disintegration—even the once powerful Revenue Inspectorate often rendered helpless by provincial militarists — Jiuda, the largest of the refineries and therefore the most conspicuous target for rent seekers, was forced to shut down several times. Even worse, the dark side of network strategy began to haunt the company. Should Jiuda continue the creative destruction of the revenue farming system and promote the growth of competing modern refineries? This chapter reconstructs how, in the face of mounting competition from other refineries, Fan and his colleagues recalibrated their strategy of creative destruction to collaborate with select revenue farmers and worked against competing refineries to preserve Jiuda’s share of the refined salt market. 1 It was a small price to pay for its patriotic mission to developing the country’s chemical industry as a “Chinese” elder brother.
Kwan Man Bun

5. Cartel as a Business Network

Abstract
As Jiuda adapted its campaign of creative destruction against the revenue farming system, overcapacity and chaotic, if not wasteful, bargaining price wars among the refineries led to adoption of further restrictive strategies. Not unlike other entrepreneurs in China then and elsewhere confronting similar issues, the refineries resorted to collusion for collective survival. 1 Beginning with a local ad hoc collaboration, the salt refineries’ efforts culminated in the establishment of the National Salt Refineries Board (Jingyan zonghui, hereafter NSRB) in 1926. Using agreements to limit production, pool sales, coordinate pricing, and with elaborate compliance rules, as well as lobbying with the government to impose barriers of entry against new refineries, they learned how to manage the market through cartelization from 1926 to 1934.
Kwan Man Bun

6. Relationship with the Nationalist State

Abstract
The relationship between the Nationalist government and private capital has been a controversial subject. This golden decade for the Chinese bourgeoisie represented in Communist historiography a collusion between Nanjing and the capitalists, especially those from Jiangsu and Zhejiang. Scholars, on the other hand, identified oppression by a ruthless regime serving interests of its own. 1 Recent studies, in contrast, emphasized the ad hoc nature and the institutional basis of that relationship. 2 For the salt industry, historians have focused on the successful efforts from a bureaucratic and institutional perspective of rationalization, professionalization, technocratic orientation, and buffering of the Salt Administration against external politicization under the new government, finding no contradiction between the laudable goals of modernization and revenue enhancement. 3 On the other hand, while contemporary critics continued to blame revenue farmers as appendages to a corrupt and bloated bureaucracy, Nanjing confronted the same problems as previous regimes had: finding a balance between revenue stability, industrial development, and people’s livelihood. 4 For the refined salt industry, its relationship with the Nationalist government thus defies characterizations of collusion or collision; it was both.
Kwan Man Bun

7. At War

Abstract
On July 7, 1937, Fan Xudong left Tianjin for Nanjing on business. He never returned, for late that night the Japanese military launched its full-scale invasion of China. Writing to Hu Shi, then Chinese ambassador to the United States, Fan was defiant:
China suffered greatly in the past year, yet our resistance remained resolute. Although I have lost over thirty million yuan and all that which took me two decades to build, I absolutely have no regrets. Indeed, I welcome this challenge, for only thus can China change…1
Kwan Man Bun

Postscript

Abstract
Yet memory of Fan lives on. Jiang Jieshi’s eulogy “Earnest and dedicated in practice” (lixing zhiyong) graced his memorial service, and Mao Zedong proclaimed him an “industrial pioneer to China’s credit (huagong xiandao gongzai zhonghua).” 1 Such was Fan Xudong’s selfless dedication to the common good that Hu Shi anointed him a modern day sage (xin shengxian) equal to any ancient ones. 2 Amidst foreign imperialism, Japanese invasion, and political chaos beyond the control of any of the actors in the period, Fan kept working: his enterprises were, in his own words, a never-ending struggle. 3 He was also remembered as a patriotic capitalist whose premature death was caused, directly or indirectly, by a callous regime. 4
Kwan Man Bun

Backmatter

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