Can “Tax-for-Fee” Reform Reduce Rural Tension in China? The Process, Progress and Limitations

Abstract

This article questions the effectiveness and viability of the fiscal response to rural stability adopted by the Chinese state. Tax-for-fee reform (feigaishui) has been heralded as a possible solution to the cancer of excessive fiscal predation by local government. While the experiment may have achieved in relief of peasant burden, the success is simply based on central government financial sponsorship and is thus hardly sustainable as a national programme. And unless there is fundamental reform of fiscal redistribution, the new scheme will ironically hurt rather than help the poorest peasants. Putting all the blame on local cadres is politically expedient, but the central government needs to admit that the present crisis is a result of the systemic discrimination against peasants and the consequent deficit in financing rural governance. The ultimate solution entails a full-scale eradication of structural bias against the peasantry.