The Impact of Local Federalism with Chinese Characteristics on the Outcomes of Hu Jintao's Pro-Rural Policies

Abstract

Former Chinese President Hu Jintao launched campaigns to promote a more “scientific” development between 2002 and 2012 in order to build a “harmonious society”, indicating his determination to shift toward a more equitable, people-centered, and less GDP-oriented growth model. This was aimed at distancing himself from the pro-growth and pro-urban policies adopted by his predecessor Jiang Zemin in order to establish his authority. Hu rolled out a string of signature policies including the removal of agricultural taxes and granting rural subsidies to farmers in a bid to reduce their financial burden and increase their income. He introduced those reforms after showing a successful track record of reducing poverty while he was a local provincial head.

Despite all these efforts and strong track record, however, official data showed that China’s inequality actually worsened with the urban-rural income gap steadily widening during Hu’s tenure. This outcome is puzzling. Political scientists have not studied the puzzle in a systemic way before. I find that exploring the causal relationship behind the puzzle carries significance for the study on the unique Chinese political system and also contributes to the literature that analyzes central-local relationships in China. It also seeks to enrich the already abundant literature examining the elements that influence income inequality.

In this paper, I argue that the local federalism system with Chinese characteristics played a critical role in the outcome of Hu’s pro-rural policy. By referencing existing literature on local federalism, I argue that the degree of local compliance with the central mandate largely hinges on the extent to which local interests are aligned with central policies. This relationship is amplified and complicated by the four key components that form the federalism system with unique Chinese characteristics: a decentralized fiscal system, a dual existence of the horizontal and vertical commanding lines, a GDP-focused cadre evaluation system, and soft budgetary restraints. This paper adopts three case studies to illuminate various coping strategies that local bureaucrats use in response to Hu’s pro-rural policy. The local federalism theory has a strong capacity in explaining not only Hu’s policy puzzle, while can be also generalized to examine the outcome of other central policies, such as pollution-reduction and anti-corruption policies.