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

The abolition of Agricultural Tax in 2005 was a major policy of the early Hu-Wen administration. But how and why did it happen? Drawing on abundant media reports, archive documents and internal speeches by key policymakers, as well as on the author's interviews, this article argues that this reform was pushed through (the "how") by "principle-guided policy experimentation" with origins in the period of Jiang Zemin's leadership. Not only does this show policy continuities from the Jiang-Zhu era into the Hu-Wen period, it also reveals a different process of policy experimentation from that identified by Sebastian Heilmann in the economic policy arena. Under principle-guided policy experimentation, Chinese central decision makers first reached consensus on the principle of the Rural Tax and Fee Reform (RTFR) drawing on policy learning from prior bottom-up local experimentation, and then formulated and implemented an experimental programme from the top-down, funding it in order to encourage local governments to participate. The evidence suggests that international, political (rural instability), economic and fiscal considerations came to explain leaders' decisions (the "why") on tax reform as much as their individual preferences.