A final resolution to the peasant burden problem the politics of fee to tax reform in rural china

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Chapter 1 Introduction
In February 2004, shortly after the celebration of Chinese New Year, the Chinese
Communist Party Central Committee (CCPCC) and the State Council (SC) jointly
issued the “No. 1 Document”
1
of the year. Described as a big “New Year gift” to
peasants from the central government, the document not only prescribed a number of
measures to increase peasants’ income, but also shed light on peasant burden
reduction, promising to gradually cut down the agricultural tax before annulling it
entirely. And as a first step, the overall tax rate would be lowered by one percent. As
the majority of the measures proposed in this document would be secured with
financial support, it was regarded as a document with a high content of “gold”.
2
It was not the first time that the center released “No. 1 Document” on rural issues.
For five successive years from 1982 to 1986, the central leadership issued five "No. 1
Documents" on agriculture, the countryside and peasants. These documents helped to
legalize many initiatives of the Chinese peasants and the local governments in rural
reforms. However, for eighteen years after 1986, the central government put its
emphasis on urban reforms and not a single “No. 1 Document” was issued
specifically on rural issues. Given this, the document was hailed as an indication that
1
The full name of the document is “Zhonggong Zhongyang Guowuyuan guanyu Cujin Nongmin
Zhengjia Shouru Ruogan Zhengce de Yijian” (“CCPCC and State Council’s Opinions on Policies
Promoting the Increase of Peasants’ Income”).
2
At the press conference after the release of the document, Chen Xiwen, deputy director of the office
of the Central Financial Work Leading Group, revealed that the central government's fiscal budget for
rural development would increase by nearly 30 billion yuan (around 3.61 billion USD) to more than
150 billion yuan (around 18.07 billion US dollars) in 2004. “Zhongyang Caijingban Fuzhuren Chen
Xiwen Jiexi Zhongyang Yihao Wenjian” (“Analyzing the No. 1 Document by Deputy Director of the

Office of the Central Financial Work Leading Group Chen Xiwen”), 8 February 2004,
accessed 2 December 2004.
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China's new central leadership would give top priority to issues of agriculture, the
countryside and peasants.
3
This move is by no means isolated in the central state’s agenda. As early as in
2000, Changping Li, a township Party Secretary in Hubei, wrote a letter to Premier
Zhu Rongji, in which he appealed: “the life of the peasants is extremely hard, the
rural areas extremely poverty-stricken and the prospect of agriculture extremely
precarious!”
4
Although Li later resigned from his post, this appeal, however, became
a slogan and he himself became a symbol of speaking-out for peasants.
5
The central
government finally came to realize that rural issues are so deep-rooted and
complicated that fundamental and concerted efforts must be made to resolve them.
A core issue raised by Li in his letter was the peasant burden
6
problem. This
problem is believed to be a major source of discontent in agricultural China and
directly threatens the social and political stability in these areas.
7
Given the low
3
For details, please refer to “Xinhua News Agency Commentator: No. 1 Document Being the Priority
of the Priorities” (“Xinhuashe Pinglunyuan: Zhongzhongzhizhong de Yihaowenjian”), 8 February
2004, accessed 1 December 2004.
4

The letter was first published in the popular Nanfang Zhoumo (Southern Weekend) and has been
widely cited since then. Changping Li, “Xiang Dangwei Shuji Hanlei Shangshu” (“A letter with Tears
from a Township Party Secretary”), Nanfang Zhoumo (Southern Weekend), 24 August 2000.
5
Despite Li’s resignation, his letter as well as the book he then published has been well received
among not only governmental officials and the scholars, but also common people. He was later
recruited by the China Reform Journal. Li himself was elected “Person of the Year” with the highest
votes by readers of Southern Weekend, beating out other influential figures in many areas.
6
There are different definitions of the term and they will be discussed in the first section of Chapter 2.
7
To have a general idea about peasants’ resistance in rural China, please see Thomas P. Bernstein and
Xiaobo Lü, Taxation without Representation in Contemporary Rural China (Cambridge University
Press, 2003), pp. 116-165; Tangbiao Xiao, “Er Shi yu Nian lai Dalu Nongcun de Zhengzhi Wending
Qingkuang: Yi Nongmin Xingdong de Bianhua wei Shijiao” (“Political Stability of Rural Mainland
China in the Past Two Decades: A Perspective from Peasants’ Actions”), Er Shi Yi Shiji (Twenty-First
Century), No. 2 (April 2003), pp. 51-60; Lianjiang Li and O'Brien, “Villagers and Popular Resistance,”
Modern China, Vol. 22, No.1 (January 1996), pp. 28-61; Jianrong Yu, “Nongmin Youzuzhi
Kangzheng jiqi Zhengzhi Fengxian: Hunan Sheng H Xian Diaocha” (“Organizational Struggle of
Rural Residents and Its Political Risk: A Survey of County H in Hunan Province”), Zhanlue yu Guanli
(Strategy and Management), No. 3 (2003), pp. 1-16.
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income rate, unpredictable and open-ended financial exactions have driven peasants
to protest in the agricultural areas in the country.
Since no statistics on type, frequency of rural protests have been disclosed, it is
not possible to directly evaluate at the national level how much the burden problem
has contributed to the instability of rural areas.
8
However, evidence can be found in a
lot of researches. A survey conducted in 1999 in ten counties of Zhejiang Province

revealed that among the 300 peasants responding, 34.33% believed that agricultural
taxes were too heavy, and in one county, the figure went up to as high as 75%.
9
An
article by Weihua Chen asserted that in 1995 and 1996, peasant burden was the
largest source of rural complaints, accounting for over 30% of the complaints lodged
at all levels from the county up, and over a third of all collective visits. Meanwhile,
the second most important source, violations of laws and CCP disciplines by
grassroots level cadres, was also related to the problem.
10
Shukai Zhao analyzed 196
letters received by Farmers’ Daily (Nongmin Ribao) in 1998 and 1999 and found that
63 of them reflected the burden problem, topping the list of problems. Reasons
ranking from 2
nd
to 4
th
were land problems, retaliation from the cadres and corruption,
8
Sometimes it is even impossible to categorize the reasons for peasants’ protests because such reasons
are usually correlated and contribute together to the complaints. For instance, in a fieldwork conducted
in 2002, the author found that peasants in an Inner-Mongolia village appealed to higher (from county
to prefecture, then the autonomous region and finally the center) authorities for the corruption of the
village head. But when talking about his corruption deeds, land appropriation, heavy financial burdens
as well as violation of village self-government policies were all involved.
9
Pengshuo Chai and Jiehong Zhou, “Yanhai Fada Diqu Nongmin dui Shuifei Fudan de Xintai”
(“Peasants’ Attitude towards Financial Burdens in Coastal Developed Regions”), Zhongguo Nongcun
Jingji (Chinese Rural Economy), No. 4 (2000), pp. 62-68. Figures presented here are especially
impressive given that Zhejiang is among the richest provinces in China.

10
Weihua Chen, “Cong Xinfang Gongzuo Jiaodu dui Dangqian Jianqing Nongmin Fudan Wenti de zai
Sikao” (“Reexamining the Question of Lightening Peasants’ Burden from the Vantage Point of Letters
and Visits”), Renmin Xinfang (People’s Letters and Visits), No. 9 (1998), pp. 28-31.
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respectively, each receiving 51, 30 and 24 letters.
11
Further, by analyzing the records
of voice messages to a central level media during the first half of 2004, researchers
found out that among 22304 messages on rural issues, 1195 (5.4%) were about
peasant burden problem, ranking No. 4 among the problems revealed.
12
This figure
was very significant given that the fee-to-tax reform, which was reported to have
effectively reduced the burden, had been carried out for two years. It is not surprising
then that some sources claim that the ten years between 1992 and 2002 has been a
time when the Chinese countryside suffered most from the peasant burden problem.
13
Observing the correlation between peasant burden and rural social-political
stability, the Chinese central government has tried very hard to solve the problem
ever since it came into prominence in the mid-1980s. According to a research group
under CCPCC Organization Department, seventy-six regulations and policy circulars
were issued between 1991 and 1999 by CCPCC, the State Council and the central
ministries, jointly or separately.
14
The sub-regulations and circulars created by the
local authorities (from provincial level to township level) to go with the central
decrees are not counted. Table 1.1 shows the major decrees issued by the central
government from 1990 to 1999 before the fee-to-tax reform was introduced.
11

Shukai Zhao, “Shangfang Shijian he Xinfang Tixi guanyu Nongmin Jinjing Shangfang Wenti de
Diaocha Fenxi” (“Appealing to Higher Authorities and the Letters and Visits System An Analysis on
Peasants Appealing to Beijing”), Sannong Zhongguo (Sannong China), Vol. 1 (Winter 2003), p. 118.
12
Jianrong Yu, “Tudi Wenti yi Chengwei Nongmin Weiquan Kangzheng Jiaodian-guanyu Dangqian
Woguo Nongcun Shehui Xingshi de Yixiang Zhuanti Yanjiu” (“Land Issue has Become the Focus of
Peasants’ Rights Defending Resistance-A Special Research on Rural Social Situation in Contemporary
China”), accessed 20 December 2004. The
project was jointly launched by the National Social Sciences Foundation Research Group and National
Soft Sciences Research Group, China Academy of Social Science (CASS).
13
Ling Zhao, “Nongmin Weiquan Zhongxin Chuxian Zhongda Bianhua” (“Great Shift in Focus
Appeared in Peasants’ Rights Defending”), Southern Weekend, 2 September 2004.
14
Zhonggong Zhongyang Zuzhibu Ketizu, Zhongguo Diaocha Baogao, 2000-2001: Xin Xingshi Xia
Renmin Neibu Maodun Yanjiu (China Investigation Report, 2000-2001: Study of Contradictions
among the People in the New Situation) (Beijing: Zhongyang Bianyi Chubanshe, 2001), p. 84.
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Table 1.1: Major Decrees Issued by the Central State
Source: Zhongguo Nongye Nianjian (China Agricultural Yearbook), 1991, 1992, 1994, 1997,
1999 and 2000.
Besides issuing numerous decrees and decisions, the central government also
made institutional efforts to resolve the problem. The State Council set up the
Leading Team on Burden Reduction (jianfu lingdao xiaozu) in the early 1990s.
Provinces and counties throughout the country set up leading teams or burden
reduction offices (jianfuban) to match the center. These offices were to monitor the
implementation of relevant laws and regulations, to assist peasants in burden-related
litigation or in appeals and to approve local governmental decrees relevant to burdens.
However, they were endowed with little real power independent from the local
authorities.

Year Issuer Policies, Regulations, Circulars etc.
1990 State Council “Circular on Earnestly Alleviating the Peasant Burden”
1991 State Council
“Administrative Regulations on Fees and Labor Services Borne
by Peasants” (This document introduced the famous 5% limit on
township and village levies).
1993 CCPCC and State
Council
“Emergency Circular Concerning Earnestly Reducing Peasant
Burdens” (The notice requires all documents and fee collection
programs be suspended and liquidated).
1993 CCPCC Office and
State Council Office
“Notice of Opinion Concerning the Management of the
Examination of the Peasant Burden”
1996 CCPCC and State
Council
“Decisions on Earnestly Alleviating the Peasant Burden”
1998 Third Session of
CCPCC 15
th
Conference
“Decisions on Key Problems Concerning Agriculture and Rural
Work by CCPCC”
1999 State Council Office “State Council Office Circular of Forwarding Opinions
Concerning Current Peasant Reduction Work by MOA, MOS,
MOF, SDPC and LAO”
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Campaigns were launched by the central government from time to time,
especially when top leaders were cautioned by signals of rural unrest.

15
For instance,
a nationwide comprehensive campaign was carried out in 1993 when rural riots
16
shocked the central leaders.
17
In March, an “Emergency Circular”
18
was issued followed by the summer directives
mentioned earlier
19
that ordered the wholesale slashing of burden, all amidst a great
deal of publicity. Intense pressure was generated on local officials as central and
provincial inspection teams descended on the countryside. Local officials could not
ignore or evade the pressures from above to reduce burdens, and in fact, unauthorized
collections, especially those that exceeded the 5 percent T and V levies, did decline
in 1993 in many places. In the autumn of that year, MOA claimed that peasants had
saved 10 billion yuan, a substantial amount since one estimate of burden resulting
from fees, fines and apportionments put them at 13.9 billion.
20
15
In fact, campaigns are frequently adopted by almost all levels of the hierarchy to create pressure for
implementing policies, which is to a certain extent a heritage from the pre-reform era. But today’s
campaigns are significantly different because they are much less intensive and usually limited to the
bureaucratic hierarchy. As a lot of resources and administrative strengths are poured in, achievements,
sometimes impressive, can be made, although the sustainability of such achievements is doubtable.
Kevin J. O’Brien and Lianjiang Li, “Campaign Nostalgia in the Chinese Countryside,” Asian Survey,
Vol. 39, No. 3 (1999), pp. 375-393; Lianjiang Li, “Support for Anti-corruption Campaigns in Rural
China,” Journal of Contemporary China, Vol. 10, No. 29 (2001), pp. 573-586.
16

Riots in Renshou County, Sichuan were among the most widely publicized examples of the
collective protests in that year. Some scholars view it as an indicator when rural conflicts began to
receive wide public attention. Shukai Zhao, “Xiangcun Zhili: Zuzhi he Chongtu” (“Rural Governance:
Organization and Conflicts”), Zhanlue yu Guanli (Strategy and management), No. 6 (2003), p.1.
17
Peasant burden may not be the only reason why the central government launched the campaign. The
problem of IOUs also suffered the central state at that time. For information on the IOU crisis, please
see: Andrew Wedeman, “Stealing from the Farmers: Institutional Corruption and the 1992 IOU
Crisis,” The China Quarterly, No.152 (1997), pp. 805–831.
18
Referring to the “Emergency Circular Concerning Earnestly Reducing Peasant Burdens” issued by
CCPCC and the State Council in May 1993.
19
Referring to the “Notice of Opinion Concerning the Management of the Examination of the Peasant
Burden” issued by CCPCC Office and the State Council Office in July 1993.
20
Bernstein and Lü, Taxation without Representation in Contemporary Rural China, p. 172. Some
researchers have overemphasized the influence of Renshou riot by taking it as the direct reason for the
campaign. “The earthquake provoked by the peasants’ riot in Renshou was not limited to the county.
The ‘victory’ by peasants was almost nationwide one. On 19 March, CCPCC and the State Council
issued ‘The Emergency Circular on Earnestly Alleviating the Peasant Burden’….” See: Bai Shazhou,
From Slave to Citizen: The Peasants of Modern China (Hong Kong: Mirror Books, 2001), p. 301.
Although being one of the major riots, it was not the only reason why the central state launched the
campaign because the key documents in that campaign had already been issued and were utilized by
peasants in Renshou to legalize their actions in their protest.
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RESEARCH QUESTIONS
Despite all the efforts made by the central government, the problem persisted, and
might have deteriorated. Since the beginning of the new millennium, especially after
the 16

th
Party Congress, China’s top leaders finally determined to address rural
problems in a serious and concerted way. The fee-to-tax reform
21
thus emerged as a
new approach that the center resorted to in order to alleviate the burden on peasants.
Many researchers identify, among others, the fiscal system as the most important
factor that led to arbitrary extractions from peasants. They concluded that it was the
imbalance between financial resources (caiquan) and task implementation (shiquan)
that had caused the county and township governments to rely on extractions from
peasants to fund target-setting programs (dabiao) as well as routine expenditure.
22
Thus, the fee-to-tax reform was designed to address some of the institutional roots of
the burden problem in the financial and bureaucratic system by simplifying the tax
categories, providing transfer payments as well as a set of complementary reforms.
The reform has reportedly made great achievements, with an average 30% reduction
among the 20 pilot provinces in 2002.
23
Scholars who conducted fieldwork have
21
The basic logic is that, by converting all non-tax levies into one major tax, the reform will eliminate
the irregularity and enhance the predictability of local extractions. The remaining taxes are the
agricultural tax, agricultural specialty tax and additional tax. See PRC Yearbook 2003, Vol. 23 (2004),
p. 409.
22
Xiaobo Lü, “The Politics of Peasant Burden in Reform China,” The Journal of Peasant Studies, Vol.
25, No. 1 (1997), pp. 113-138; Qiucheng Tan, “Difang Fenquan yu Xiangzhen Caizheng Zhineng”
(“Fiscal Decentralization and Functions of the Township Government”), Zhongguo Nongcun Guancha
(China Rural Survey), No. 2 (2002), pp. 2-12; Jun Zhang, “Xiangzhen Caizheng Zhidu Quexian yu
Nongmin Fudan” (“The Drawback of the Financial System of Township and Farmer’s Burden”),

Zhongguo Nongcun Guancha (China Rural Survey), No. 4 (2002), pp. 2-12; Yang Zhao and Feizhou
Zhou, “Peasant Burdens and Rural Finance,” Hong Kong Journal of Social Sciences, No. 17 (Autumn
2000), pp. 67-85.
23
Different figures can be obtained from different sources and this specific number is from the
Ministry of Agriculture, People’s Republic of China, 2003 China Agricultural Development Report
(Beijing: China Agriculture Press, 2003), p. 65. What’s more, the results varied widely across the
country, and generally coastal provinces and those minority regions enjoyed a higher reduction than
the central belt.
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confirmed the reduction.
24
And the No. 1 Document of 2004 was among the
continuous efforts to solve the problem and can be viewed as a policy to solidify and
magnify the achievements of the fee-to-tax reform. Encouraged by the document, the
fee-to-tax reform was pushed to a new stage. By August 2004, 30 provinces,
autonomous regions and municipalities had either lowered the agricultural tax rate or
even cancelled it.
25
Regarded as the “third rural revolution”
26
since the foundation of P. R. China in
1949, the reform has by far gained great success in terms of burden reduction and it
seems that it is a real blessing to Chinese peasants. No wonder some researchers
believe that such a reform has “shown greatest promise of making a dent in the
(burden) problem”.
27
Unfortunately, it is not yet a happy ending. Many observers have found that the
reform actually deteriorated the fiscal situation at the county and township levels
since the allocation of new financial resources from the center is far from sufficient to

make up for the deficit created by the reform.
28
Hui Qin summarized the “Huang
24
Xiujuan Tian and Feizhou Zhou, “Shuifei Gaige yu Nongmin Fudan: Xiaoguo, Fenbu he Zhengshou
Fangshi” (“Fee-to-Tax Reform and Peasant Burden: Effects, Distribution and Collection Moods”),
Zhongguo Nongcun Jingji (Chinese Rural Economy), No. 9 (2003), pp. 12-18. Hubei Sheng Nongmin
Jianfu Diaochazu, “Hubei Sheng Liu Xianshi Nongcun Shuifei Gaige hou Nongmin Jianfu Qingkuang
Diaocha”(“Investigation of Peasant Burden Reduction in Six Counties (Cities) of Hubei Province after
Fee-to-Tax Reform”), Hubei Shehui Kexue (Hubei Social Sciences), No. 10 (2003), pp. 25-28.
25
“Woguo 30 Sheng Shishi Nongyeshui Jianmian, Nongcun Shuifei Gaige Jin Xinjieduan” (“30
Provinces in Our Country Cut down Agricultural Tax and Rural Fee-to-tax Reform Enters a New
Phase”), accessed 22 December
2004. The report says, by then eight provincial level units had annulled the agricultural tax. They are
Jilin, Heilongjiang, Shanghai, Tibet, Beijing, Tianjin, Zhejiang and Fujian. 11 provincial units lowered
down the tax rate by 3 percent and the rest 11 provincial units cut the tax rate by 1 percent.
26
The first two revolutions are the land reform from 1949 to early 1950s and the reform of the
household contract responsibility system from 1978 to the early 1980s.
27
Bernstein and Lü, Taxation without Representation in Contemporary Rural China, p. 166.
28
Shouyin Zhu et al., “Nongcun Shuifei Gaige Shidian he Xiangcun Guanli Tizhi Gaige Genzong
Yanjiu Baogao” (“Research Report on Rural Pilot Fee-to-tax Reform and Rural Administrative System
Reform”), Jingji Yanjiu Cankao (Economics Research Review), No. 40 (2003), pp. 2-24; Licai Wu,
“The Political Consequences of the Rural Fee-to-Tax Reform in Mainland China: A Case Study of
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Zongxi Law”
29

from burden reduction efforts in Chinese history, raising concerns on
the feasibility of converting all fees into a unified tax. In addition to that, researchers
have also noticed that the reform has more or less been carried out in a campaign
manner and thus adds to the uncertainty of its sustainability.
30
Scholars like Licai Wu
even suggested that the fee-to-tax reform not only made the township governments
more dependent on upper level state and thus bureaucratized, but also pushed the
township governments into a dilemma of fiscal constraints and their responsibilities
for local public goods provision.
31
Given all the contradictory phenomena stated above, several interesting questions
emerge: how could the current fee-to-tax reform achieve such a high percentage of
burden reduction despite the financial shortage it created at the county and township
level? In other words, how did counties and townships manage to survive the revenue
losses as a result of the burden-cutting reform? This is the central question in this
research. To answer it, we must assess the burden reduction on peasants, the revenue
loss of local authorities, especially township governments and further to disclose the
mechanism that has helped townships to manage the crisis. Besides, another question
Anhui Province,” Hong Kong Journal of Social Sciences, No. 24 (Winter 2002), pp. 85-113; Thomas P.
Bernstein, “Can the Peasant Burden Problem Finally Be Resolved? A Preliminary Assessment of
Recent Policy Innovations,” Paper prepared for 40
th
Anniversary Reunion Conference of the
Universities Service Centre for Chinese Studies, ‘The State of Contemporary China’, Chinese
University of Hong Kong, 2003.
29
He pointed out that although such reforms might make some achievements in the short run by
converting all fees and taxes into one single levy, they were deemed to fail as people and especially the
local authorities would forget (or at least pretend to have forgotten) that the single levy had already

included all those miscellaneous fees and taxes, and began to extract new fees or taxes. Qin Hui,
Nongmin Zhongguo: Lishi Fansi yu Xianshi Xuanze (Peasantry China: Historical Reflections and
Current Choice), (Zhengzhou: Henan Renmin Chubanshe, 2003), pp. 17-23.
30
Bernstein, “Can the Peasant Burden Problem Finally Be Resolved? A Preliminary Assessment of
Recent Policy Innovations.”
31
Licai Wu, “Nongcun Shuifei Gaige dui Xiangzhen Caizheng de Yingxiang jiqi Houguo: Yi Anhui
Sheng Weili” (“The Impact of the Rural Fee-to-tax Reform on Township Finance and Its
Consequences: Case Study on Anhui”), Bijiao (Comparative Studies), Vol. 4 (2003), p. 156.
- 10 -
we may raise in our mind is: how does the fee-to-tax reform affect state power at the
grassroots level? Obviously clear and logically consistent explanations to these
questions will provide policy implications to the peasant burden problem and
maintenance of rural social and political stability, especially in agricultural areas. By
examining the process of the fee-to-tax reform and its complementary reforms, the
author also endeavors to analyze the changing role of the state in the Chinese
countryside.
A PERSPECTIVE FROM THE BROADER THEORECTICAL BODY
As Thomas Bernstein and Xiaobo Lü have put it, “The burden issue was part and
parcel of the underlying challenge of how to make the transition from an authoritarian
to a democratic, responsive regime”.
32
And it was also perceived as a result of the
decentralization and de-concentration of state power caused by economic reform.
33
Therefore, answers to the questions raised in the paper not only have significant
policy implications, but also provide good opportunities to make contributions to the
theoretical body of transitional regimes and the state-society relationship.
To a great extent, most theoretical endeavors on peasant issues can be viewed as

part of the consistent concern with the state-peasantry relationship among China
Studies students, which in turn is linked to the profound methodological tradition of
applying state-society model to political transitions. Philip Huang studied peasant
32
Bernstein and Lü, Taxation without Representation in Contemporary Rural China, p. xvi.
33
Xiaobo Lü, “The Politics of Peasant Burden in Reform China”; Qiucheng Tan, “Fiscal
Decentralization and Functions of the Township Government”; Jun Zhang, “The Drawback of the
Financial System of Township and Farmer’s Burden”; Thomas P. Bernstein and Xiaobo Lü, “Taxation
without Representation: Peasants, the Central and the Local States in Reform China,” The China
Quarterly, No. 163 (2000), pp. 742-763.
- 11 -
economy and social change in north China in the first half of 20 century, finding the
impact of bureaucratic intrusion on the relationship between state and village. He
commented that “The state in the Republican period could make its power felt in the
village but did not have the apparatus to place its own salaried agents into villages,
and had to work with unsalaried men drawn from the communities themselves”.
34
And at the close of the republican period, “village and state remained in an uneasy
relationship fraught with tension and abuse, or the potential for abuse.”
35
Prasenjit Duara studied the expanding and modernizing role of the Chinese state
in the early 20
th
century and suggested that the rapidly growing revenue needs of the
modernizing state forced it to rely on traditional entrepreneurial brokerage to generate
the needed revenues and thus led to state involution. Although Duara’s study has
focused on North China before CCP came into power, it is still suggestive. Just as he
himself has pointed out, “The liberalization of recent years has reintroduced these
historical issues, although in a vastly different context. Some scholars are beginning

to see village cadres as entrepreneurs and brokers mediating the relationship between
state agencies and villagers.”
36
Helen Sui compared the Chinese rural society in the imperial period with that
under the post-revolutionary government and found that the strong organizational and
ideological pressure created by the party-state has created a structure of dependence,
which in turn “obliged the cadres to push even the most unrealistic policies upon the
34
Philip C. C. Huang, The Peasant Economy and Social Change in North China (Stanford, CA:
Stanford University Press, 1985), pp. 305-306.
35
Philip C. C. Huang, The Peasant Economy and Social Change in North China, p. 306.
36
Prasenjit Duara, Culture, Power and State: Rural North China, 1900-1942 (Stanford, CA: Stanford
University Press, 1988), p. 254
- 12 -
villagers.”
37
So with the penetration into the Chinese countryside, the party-state gave
its local agents much less room to maneuver than the imperial regime did.
With the commencement of China’s reform and opening-up, increasing
intellectual attention has been devoted to the evolution of the state-peasantry
relationship in economic development. Acknowledging the fragmentation and
divergence of interests between the central and the local states, scholars begin to ask:
Who is the state? And it is a welcome development as it takes the central-local
relations into consideration. Jean Oi proposed the concept of “local corporatism” to
highlight the important role of local governments in rural industrialization.
38
However,
this approach neglects the predatory, extractive aspects of the local state, among

which the peasant burden problem is a very good example as it became worse in the
1990s. Thomas Bernstein and Xiaobo Lü were among the first to study the predatory
aspect of the local state by investigating the peasant burden problem in agricultural
areas of China. They suggested that the central state lacked the ability to control local
officials from above since it failed to lighten the burden on peasants.
39
But Maria
Edin offered a different explanation. She studied the cadre management system and
concluded that the party-state maintains the ability to be selectively effective. And the
reason behind the failure of burden reduction efforts is a result of the central state’s
priority settings and policy conflicts.
40
Susan Whiting shares a similar point of view
in her recent book. She noted that in 1996, burden reduction was actually made a part
37
Helen Sui, Agents and Victims in South China: Accomplices in Rural Revolution (New Haven and
London: Yale University Press, 1989), p. 294.
38
Jean Oi, “Fiscal Reform and the Economic Foundation of Local State Corporatism in China,” World
Politics, Vol. 45, No. 1 (1992), pp. 99-126.
39
Bernstein and Lü, “Taxation without Representation: Peasants, the Central and the Local States in
Reform China”; Bernstein and Lü, Taxation without Representation in Contemporary Rural China.
40
Maria Edin, “State Capacity and Local Agent Control in China: CCP Cadre Management from a
Township Perspective,” The China Quarterly, No. 173(2003), pp. 35-52
- 13 -
of the performance criteria for local officials, but it was without much effect since the
other criteria remained, requiring officials to make choices among them.
41

Yongshun
Cai provides a way out of the dichotomy of predatory and developmental state. In his
eyes, the state can be neither predatory nor developmental, but rather irresponsible.
And the local cadres, namely state agents may make decisions and allocate resources
“to enhance their own image, leading to a waste of public resources”
42
.
Despite the progress made, answers to the following questions are still not
satisfactory. “How does state control vary among regions, administrative levels and
time periods? And are such variations best explained by central policy or by local
conditions?”
43
In studying the peasant burden problem, scholars further realized the
fragmentation of local state power and the conflict of interests among different levels
of local state and its agents, and thus moved ahead on the basis of previous
achievements. Xiaobo Lü studied budgetary constraints and revenue-seeking behavior
of local governments as key factors of peasant burden, concluding that the state is
being reshaped with its major role changing from “redistributive” to “regulatory”,
rather than reduced.
44
However, Lü failed to define the border between the state and
society clearly. Jingyao Wang has made some progress by investigating the principal-
agent relationship in the process of taxes and charges collection and he highlighted
41
Susan Whiting, Power and Wealth in Rural China: The Political Economy of Institutional Change
(New York: Cambridge University Press, 2001), p. 286
42
Yongshun Cai, “Irresponsible State: Local Cadres and Image-Building in China,” Journal of
Communist Studies and Transition Politics, Vol. 20, No.4 (December 2004), pp. 20-41.
43

Elizabeth J. Perry, “Trends in the Study of Chinese Politics: State-Society Relations,” The China
Quarterly, No. 139 (1994), p. 712.
44
Xiaobo Lü, “The Politics of Peasant Burden in Reform China,” pp. 113-138.
- 14 -
the middle-level collusion among township and village cadres.
45
But the middle-level
collusion theory cannot explain why policies were implemented differently and
selectively, a prominent phenomenon in policy implementation in rural China.
O’Brien provides a possible explanation to that. He found that the implementation of
policies largely hinged on the amount of bureaucratic attention a village had received
and on how villagers and local cadres had perceived their interests and understood
their resources in relation to each other and to higher levels.
46
Elizabeth J. Remick, in
her paper criticized that, “The standard narrative of state formation emphasizes
processes of bureaucratization, centralization, and homogenization that eliminated
local differences of many kinds.”
47
By focusing on taxation and public finance
activities, she argued that “central policies, local social context, and the preference of
local officials shaped the process of local state building, creating local state
variation.”
48
Along this line, Licai Wu, who studied the latest development of fee-to-tax reform,
has tried to examine the political consequences of the reform. And he concluded that
as a result, the state would oppress the rural society, which might hinder the
development of grassroots democracy in rural areas. And the reform would
bureaucratize the township government and eliminate the intermediary between the

45
Jingyao Wang, “Principal-Agent Relationship in the Implementation of Rural Policy: An observation
on the Collection of Village Taxes and Charges,’’ Hong Kong Journal of Social Sciences, No. 24
(Winter 2002), pp. 85-113.
46
K. J. O’Brien, "Implementing Political Reform in China's Villages," The Australian Journal of
Chinese Affairs, No. 32 (1994), pp. 33-59.
47
Elizabeth J. Remick, “The Significance of Variation in Local States: The Case of Twentieth Century
China,” Comparative Politics, Vol 34, No. 4 (July 2002), p. 399.
48
Elizabeth J. Remick, “The Significance of Variation in Local States,” p. 402.
- 15 -
state and the mass, and thus result in direct conflict at the grassroots level.
49
Wu’s
effort is provocative in the sense that he noticed the possible expansion of state power,
which suggests that the state is not only fragmented, but also can be affected by a
number of other factors. Thus the financial burden, whether shouldered by peasants or
by local governments, together with policies that are aiming at eliminating the
problem may affect the reshaping of state power, especially at grassroots level.
THEORETICAL FRAMEWORK AND ARGUMENTS OF THE STUDY
Even with such a limited survey in the literature, we can see how the state-society
model has demonstrated its strength in explaining Chinese rural politics, including the
peasant burden problem. Along with the continuous intellectual efforts, this research
is also conducted within the theoretical framework of state-society model.
Scholars have agreed that generally the relationship between state and society is
not characterized by domination of one over the other. And based on current
achievements reviewed in the above section, we can establish the following
assumptions for a model that assembles what Migdal has termed as “state in

society”
50
: (1) the Chinese state reacts to social demands as peasants have
demonstrated both their will and strength in protests against the peasant burden
problem; (2) the Chinese state is strong enough to dominate policy making and
remain selectively effective in policy implementation; (3) the state must be
disaggregated both vertically and horizontally in order to understand local variations
49
Licai Wu, “The Political Consequences of the Rural Fee-to-Tax Reform in Mainland China: A Case
Study of Anhui Province,” pp. 85-113.
50
Joel S. Migdal, Atul Kohli, Vivienne Shue, eds., State Power and Social Forces: Domination and
Transformation in the Third World (New York: Cambridge University Press, 1994).
- 16 -
in policy implementation; (4) the state and society are intertwined at grassroots level
and the border between state and society is with great flexibility.
Since that the later two aspects have not been sufficiently examined by previous
studies, the author will place special emphasis on the fragmentation of the state and
the flexibility of the state-society border by highlighting the pressure transferring
mechanism within and beyond the state as well as the changing role of grassroots
authorities in public goods provision.
How did local governments manage to cope with the financial shortage created by
the fee-to-tax reform? To answer this question, we have to examine the interactions
between the state and peasantry as well as the interplay among fragments and
different levels within the “local” state. And based on the assumptions stated above,
the author proposes the following hypotheses: The fee-to-tax reform has created fiscal
deficits on local governments and township authorities shouldered the major part of
the pressure. But the townships managed to survive by diverting the pressure to their
subordinates. Besides, cutting down the provision of public goods could also serve as
an important measure to cushion the fiscal pressure on townships.

Close examination of empirical evidence collected at the grassroots level confirms
the above hypotheses, showing that there is a pressure transferring mechanism within
the regime. On the one hand, much of the fiscal pressure created by the fee-to-tax
reform was placed on township governments. On the other hand, when confronting
the fiscal gap, townships have subtly adjusted to divert the pressure. Besides the
transfer payments and the complementary reforms aimed at cutting down the
expenses, non-institutional tactics were employed to pass the financial stress on to
- 17 -
those stations and agencies in the township as well as the village administrations. This
process is driven by the internal logic of passing pressures from one level of the state
to the other. So although the fiscal deficits created by the fee-to-tax reform have hit
township governments severely, the actual bearers of much of the pressure are those
subordinate stations, agencies, village administrations etc. Thus the fiscal pressure on
townships created by the fee-to-tax reform as well as its impacts should not be over-
estimated. In addition to that, the author also found that the demand and supply of
public goods at grassroots level are more flexible than scholars have depicted. Based
on these two findings, the author concludes that the financial difficulty confronting
townships after the fee-to-tax reform has been over-exaggerated by current studies.
Although townships have managed to survive the fiscal pressure created by the
fee-to-tax reform, the reform has effectively reshaped state power distribution at the
grassroots level. All the measures taken by local authorities, no matter institutional
ones or non-institutional ones, have greatly influenced the re-distribution.
Above all, the fee-to-tax reform and the complementary reforms have changed the
functions of the grassroots authorities, especially townships. First, townships have
been streamlined and public services institutions are stripped from the administrative
organ. Second, with further regulation of the township budget management and the
establishment of national transfer payments for townships, the fee-to-tax reform has
incorporated the townships deeper into the state financial system and caused its
further bureaucratization. In addition, since township governments have neither the
incentive nor fiscal capacities to maintain the public goods provision system, the

- 18 -
redefinition of local state’s functions would mean withdrawal from the sphere of
certain public goods provision.
The role of the village administration has also been redefined. Being an informal
part of the state apparatus as well as villagers’ self-government organizations, village
administrations have been important actors in rural politics. And as tax collection is
now no longer a big problem, the major work for village administrations is changed
accordingly to tasks like public goods provision and so on. However, since most
villages are no longer economically independent because their budgets are now
handled directly by townships, their limited role of public goods provision has been
greatly hindered. So the function of the village administration is greatly diminished
from the perspectives of both the state and the peasants.
Clearly, both township and village level authorities in agricultural areas become
less independent after the fee-to-tax reform and a series of complementary reforms.
And such dependence in turn contributes to the further bureaucratization of the
grassroots state. However, such dependence and thus the degree of bureaucratization
of the townships should not be over-exaggerated given that they have managed to
divert much of the pressure via the pressure transferring mechanism.
Further, we may raise questions on the central-local relationship: why has central
policy made a dent this time? In other words, if the adaptation of local state power
has made the fee-to-tax reform successful so far, then what about the previous efforts
made by the central state? Did the local state also adapt before because of other
policies? If it did, then does it mean that this time the burden will also rebound as
usual? The author here wishes to highlight two new characteristics of the current
- 19 -
reform which makes it hard to predict the accurate outcome. First, the reform is made
a priority in local governments’ curriculum and thus forces the state power to change
in a way which is not so easy to rebound. Second, the injection of financial resources
from the center to offset the revenue losses has become a new variable.
51

In sum, the author believes that by studying how fee-to-tax reform and its
complementary reforms were initiated, implemented as well as how local
governments coped with the subsequent negative consequences, we will be able to
have a better understanding of the state-society relations in China, especially in terms
of the fragmentation within the state and the flexibility of state-society border.
RESEARCH METHODOLOGY
Given the nature of the study and the types of data available, the research adopts a
qualitative approach and the author relies heavily on the method of analytical
description. The methodology requires intensive knowledge on the targets of the
research so that data collection is an especially important premise.
Away from the secondhand data provided by newspapers, magazines and studies
by other researchers, this research is mainly based on firsthand data collected in a
three-month fieldwork carried out across China in Anhui, Hubei, Hebei, Jiangsu and
Beijing between July and October 2004.
52
The fieldwork can be divided into two
parts according to the different goals achieved.
51
Some of these points were generated in the inspiring discussions and talks with my friends,
especially those from the Department of Political Science, National University of Singapore. Here I
should express my thanks to their illuminative suggestions.
52
The author feels obliged to Asia Research Institute for their generous funding for the fieldwork,
without which the fieldwork would not be successful. And I should express my thanks to Hengfu Ruan
in Political Science Department of NUS, Jing Shen, Qisheng Ling, Yunxing Hu and Leyan Peng of
Peking University, Xiaobing Li of Tsinghua University for their assistance during my fieldwork.
- 20 -
First, in each of the localities stated above, at least one village was chosen to
assess the reform from the perspective of common villagers and village cadres. These
fieldwork sites were carefully chosen to represent the whole situation in the country.

Table 1.2 lists the villages chosen for the study and explains the factors taken into
consideration when choosing these sites.
Table 1.2: The Selection of Fieldwork Sites
Villages Localities Reasons for choosing the site
Village
Ni
53
Q County, Anhui The village lies in a National Designated Poverty
County
54
, with little land for grain crops cultivation.
Village
Zheng
J County, Hubei The village also lies in a National Designated Poverty
County; relies heavily on grain crops cultivation.
Village
Yu
S County, Hebei A normal village, mainly relies on growing grain crops or
cotton, but enjoys some cash earning opportunities.
Village
Xi
Beijing The village lies in the suburbs of Beijing, and the villagers
enjoy more cash earning opportunities.
Village
Dong
J County, Jiangsu The village lies in the economically better off coastal
province of Jiangsu, depends on salaries from TVEs
55
or
other sources.

Special thanks should also go to Associate Professor Guoqing Hao of Hubei Provincial Party College,
Professor Xuefeng He and Dr Ximing Wang in Central China Normal University.
53
To avoid possible trouble, I would not use the true names of the localities or my interviewees and
correspondents in the paper.
54
In fact, development levels of National Designated Poverty Counties (NDPCs) vary greatly. A non-
poverty county may be less developed than many NDPCs while some counties on the national poverty
list may be richer than some common counties. This paradox occurs because NDPCs may receive
special funds for relief and development while cadres in NDPCs may get promotion and other rewards
if the county they serve graduates from the list. But generally speaking, those counties designated as
poverty counties are relatively poorer.
55
Nowadays, the number of so called TVEs has diminished greatly in the province as many of these
enterprises have been turned into private ones, indicating a failure of the Southern Jiangsu model
compared with Zhengjia model in developing local economies. However, it cannot be viewed as a
purely market function because the local governments have greatly involved in “pushing the change of
ownership” (tuijin gaizhi). Given this situation, I would include those private enterprises in the concept
of TVEs in this paper. To learn more about how local authorities involved in the “change of
ownership”, please refer to: Pan Wei, Politics of Marketization in Rural China: The Coalition between
Grassroots Authorities and Rural Industries (Beijing: Shangwu Yinshuguan, 2003).
- 21 -
In the selected villages, in-depth interviews with village cadres have generated
rich data as well. The following set of items has been included in the menu for the
village cadres during the fieldwork: the income and expenses before and after the
reform; provision of local public goods; real changes in peasant burden; the changes
of the manner and degree of intervention from the township government; etc. Further,
semi-structural interviews were conducted among villagers
56
to assess the impacts of

the reforms on their everyday life and their attitudes towards the reform. And the
selection of correspondents was random. Although information from common
villagers was usually inaccurate and nonsystematic, this effort is an essential part to
measure the variable of public goods provision by local authorities. In addition to that,
it also provides a chance to check the validity of the data provided by cadres.
Second, to examine the fiscal pressure on townships and how they managed to
divert the pressure, township cadres were accessed whenever possible. On these
occasions, the author focused on the following components: the fiscal pressure
brought about by the reform, how they responded to alleviate the pressure, how it
affected the control over village cadres, how it affected the provision of public goods,
any reduction in the personnel at the township level or the village level, how to keep
the village cadres’ enthusiasm in managing the villages and completing the tasks
assigned from above, and so forth. Such effort was especially successful in Hubei,
where the author managed to conduct in-depth interviews with cadres from five
townships across the province. So the analysis of township reforms was exclusively
56
In most occasions in the paper, the term “villagers” is equal to “peasants”, meaning rural (or non-
urban) citizens. It is acceptable because of the notorious hukou (registration of permanent residence)
system: although rural citizens may find jobs in the city, they are still regard as peasants or migrant
workers if his hukou is still in the countryside. And all rural citizens are supposed to contract a piece of
land from the state.
- 22 -
based on the data from Hubei. The author feels justified because this research focuses
on the agricultural areas of China and Hubei was very typical in the fee-to-tax reform
as well as the subsequent complementary reforms.
LIMITATIONS OF THE STUDY
There are several limitations in this research which need to be highlighted here. In the
first place, although the author has chosen the sites on purpose to represent the whole
country, we should still be cautious to apply the findings in this research to each
specific situation in China. After all, China is such a big country with such great

diversity that we can never expect five villages to demonstrate all the characteristics
of the Chinese countryside. To make a bolder claim on generalizing the findings, we
need a much larger sample which cannot be afforded for a Master thesis.
In the second place, for practical reasons, firsthand data on county level or higher
authorities were not available to the author, with which a more systematic model from
the top to the bottom may be built. To make up, the author relies on media and
findings by other researchers for relevant information. However, this part remains
weak in the paper.
Another problem is about the definition of state power, a concept which is vague,
if not controversial. Some scholars urge that, “States must be disaggregated.”
57
And
they suggest that “the overall role of the state in society hinges on the numerous
junctures between its diffuse parts and other social organizations.”
58
Bearing this in
57
See “Introduction: Developing A State-in-Society Perspective,” in Joel S. Migdal, Atul Kohli and
Vivienne Shue (eds.), State Power and Social Forces (New York: Cambridge University Press, 1994),
p. 3.
58
ibid.
- 23 -
mind, the author here does not bother to trace the evolution of the concept per se, but
focuses on two specific aspects of it, namely the ability to provide public goods and
the degree of bureaucratization at the local level. These two aspects don’t necessarily
conflict with each other, neither are they mutually complementary. By focusing on
these two aspects, the author attempts to disaggregate state power vertically and
horizontally at the local level and hopes it will be the beginning for future research.
ORGANIZATION OF CHAPTERS

The focus of this study is the interaction between township and village
administrations as well as that between local governments and the peasantry. By
analyzing the implementation of the fee-to-tax reform and its subsequent reforms, the
author tries to unveil the logic of grassroots politics in rural China. The chapters are
organized as follows.
In Chapter 2, the historical background of the fee-to-tax reform, i.e. the evolution
of the peasant burden problem will be introduced in the first section. After that, the
fee-to-tax reform at national level will be introduced, from its origin to the demise of
the agricultural tax. Finally, the dilemma confronting the grassroots authorities,
especially the township governments, will be brought in before the chapter closes.
Chapter 3 will be devoted to presenting facts about the fee-to-tax reform and its
complementary reforms collected through fieldwork, reports as well as researches by
other scholars. The chapter will focus on the following aspects of the reform: burden
reduction on peasants, the fiscal pressure on townships, its consequences and the
intuitional countermeasures.
- 24 -
Chapter 4 will give priority to theoretical analysis within the state-society model.
The pressure transferring mechanism will be led in to explain how townships have
managed to divert a large part of the fiscal pressure created by the fee-to-tax reform.
And after that, several characteristics of grassroots public goods provision will be
highlighted before concluding the chapter by focusing on the re-shaping of local state.
Chapter 5 is the conclusion of the thesis, which not only presents the findings of
the study and suggestions for further research, but also offers some policy
implications. Although central policies can effectively re-shape the local state, it is
doubtful whether they would re-shape the local state in the way the center has
designed it. This chapter also endeavors to explore the peasant burden problem in a
broader view by relating it to the grassroots democracy in rural China.
- 25 -
Chapter 2
Peasant Burden and Fee-to-tax Reform:

Historical Background
Peasant burden was a common problem in Chinese history as China was an agrarian
economy and land taxes were the major source of revenue for the imperial
government as well as the successive Republican regime. In the Maoist era, the
agricultural sector contributed greatly to China’s rapid industrialization and “peasants
became residual claimants to the harvest, after the collectives and the state had taken
their share”. Thomas Bernstein and Xiaobo Lü have made a splendid historical
comparison of the burden problem in their Taxation without Representation in
Contemporary Rural China, so the author does not intend to duplicate the process
here.
59
However, to understand why the problem persists despite the central
government’s continuous efforts, and further why the recent fee-to-tax reform has
successfully made a dent in the problem, people have to answer the following
questions: What is peasant burden? How did “peasant burden” become a problem in
China’s reform era and how did it evolve? What are the reasons for this problem?
This chapter tries to answer these questions before describing the trial and expansion
of the fee-to-tax reform and the demise of the agricultural tax. After that, the fiscal
pressure brought about by the fee-to-tax reform will be discussed in brief before we
shift to the grassroots perspective in Chapter 3.
59
Thomas Bernstein and Xiaobo Lü, Taxation without Representation in Contemporary Rural China,
Chapter 2.