Abstract: In the first half of the 19th century, in order to deal with the problems of the salt monopoly system, the Qing government promoted a series of salt liberalization reforms, of which the Ke Gui Di Ding in Hedong salt district and the Fei Yin Gai Piao in Huaibei salt district were the most representative. The reforms of these two districts eased the inherent contradictions of the salt monopoly system and brought improved revenue of the salt industry and better local economic performance. However, the difference between the two districts in the governance effectiveness led to divergent outcomes in the system:the reform of Hedong caused the floods of Mongolian smuggling groups, and was thus aborted eventually; while the reform of Huaibei helped eliminating the potential danger of smuggling, and therefore achieved a more stable institutional life. This difference was mainly due to the differences of the smuggling profit and the vagrant population between the two places. Because of the price difference prior to the reform, the liberalization gave a big boost to the profit margin of salt smuggling in Hedong, while the opposite was true in Huaibei. This had led to a significant increase of smuggling groups in one place and a decrease in another. After the reign of Jiaqing, due to the intensified population pressure and social unrest, homeless population gradually increased in Huaibei and so did the problem of salt smuggling. Nevertheless, Huaibei's liberalization policy was able to transform smugglers into legitimate salt merchants, helped absorbing the unemployed, and achieved good governance results, therefore not only did it last longer, but also realized the systems diffusion. This paper examines the course of reform, analyzes the timing of the key steps, and demonstrates the close interaction between the economic system and the social governance in traditional society. The grave issues of social governance in the first half of the 19th century profoundly influenced the reform direction of the salt system in the Qing Dynasty.

Key words: Salt Monopoly System, liberalizing reform, social governance