Principle-guided Policy Experimentation in China: From Rural Tax and Fee Reform to Hu and Wen's Abolition of Agricultural Tax

In December 2005, the Chinese central government under the leadership of Hu Jintao 胡锦涛 and Wen Jiabao 温家宝 formally announced the total abolition of Agricultural Tax. Over 145 billion yuan that was directly extracted from farmers every year was cut. From 2000 to 2010, the Chinese central government transferred over 570 billion yuan to local governments, subsidizing their revenue loss for carrying out the reform.¹ This is considered by the Chinese official propaganda as one of the great political achievements completed under the Hu–Wen leadership. How and why did this happen? Thanks to abundant attention paid to rural tax and fee reform (nongcun shuifei gaige 农村税费改革) in the past, we have learned much about the processes, contents, consequences and ramifications of this key reform.² Drawing on the insights of existing literature, this article intends to trace the historical evolution of the complete policy process to identify key stages as well as critical actors and factors that shaped decisions leading to the abolition of Agricultural Tax.

Evidence shows that experimentation played a critical role from the beginning of this reform in early 1990s until its completion in 2005. However, as a social policy,³ rural tax and fee reform did not create obvious economic incentives or rent-seeking opportunities for local officials or social elites to initiate and implement it. This pattern of policy experimentation contrasts with what Sebastian Heilmann has identified in China's economic reforms. Heilmann suggests a staged process of policy change in China reflecting the unique central–local interactive model that he proposes as “experimentation under hierarchy.”⁴ Largely emphasizing the bottom-up initiative of local actors, Heilmann confines his model to Chinese economic policy domains and rules out its applicability in generating transformative social policies. This is because, as he argues, social reforms cannot bring about short-term economic benefits and rent-seeking opportunities, which are indispensable to motivating local officials and social elites to engage in policy experimentation from the bottom-up.⁵ Examining political reforms initiated by local officials during the Hu–Wen period, Wen-Hsuan Tsai and Nicola Dean seem to affirm Heilmann's emphasis of the bottom-up initiative in policy experimentation, but they argue that local officials’ initiative comes from gaining credits through “political performance” to get promotion under the cadre responsibility system....