The study of political economy in rural China has been a growing subfield of Chinese politics and comparative politics. Chinese rural governance, central–local relations, local inter- and intragovernmental relations, taxation and finance, rural political participation—all of these have been mainstream and very important issues in the study of contemporary China in recent years. In the last few years alone, an increasing number of books and articles have been published, including Lynette H. Ong (2012), Prosper or Perish: Credit and Fiscal Systems in Rural China and Hiroki Takeuchi (2014), Tax Reform in Rural China: Revenue, Resistance, and Authoritarian Rule. As this literature has been closing the gap between reality and our understanding of the rapidly changing Chinese countryside, Chen’s most recent book helps to advance our knowledge of the buildup of internal political and socioeconomic tensions in rural China, which promises to bedevil the Chinese leadership well into the twenty-first century.

Chen argues that rural governance in China has been transformed because “[t]he positional authority and income advantages of traditional village cadres were gradually but steadily eroded in the wake of expanding markets that replaced the state institutions in allocation of economic resources and thus nibbled away at their redistributive power” (p. 128). In a sense, this observation is consistent with, as Chen notes, Victor Nee’s theoretical argument that “marketization caused a decline in the significance of the positional power of the village cadres who had failed to enter into (private) entrepreneurship” (p. 271). However, as China specialists often insist, “[t]he impact of market transition on political power structure is a different issue … and one on which reform China, Eastern Europe, and the former USSR are barely comparable” (p. 14). So, has rural governance in China completely collapsed when traditional village cadres have lost their ability to control their redistributive power over economic resources? Chen disagrees. He argues that a new type of village cadres, called “entrepreneur cadres,” have emerged in some of the villages that satisfy certain economic conditions. Those entrepreneur cadres, who may provide public goods, can be found in villages that have their own economic resources, such as private industries and/or commercial activities, which bring a sufficient amount of revenue to the fiscal coffers. One can easily see that the legitimacy of these entrepreneur cadres is very different from that of traditional village cadres whose legitimacy is based on their political appointment.

Chen traces the trajectory of the transformation of China’s rural governance during the post-Mao reform to a series of fiscal reforms conducted by the central government: the 1994 tax reform, the tax-for-fee (TFF) reform that began in 2002, and the abolition of the agricultural taxes (AAT) completed in 2006. He then argues that “the straw that broke the camel’s back was the AAT” (p. 5). I agree with this argument. As discussed in Tax Reform in Rural China, a series of fiscal reforms, starting with the 1994 tax reform, has significantly undermined the traditional system of China’s rural governance and caused political and social instability in the countryside. The Transformation of Governance in Rural China starts its discussion with the observation that nowadays, “organized or collective violent resistance is an explicit, outright challenge to the political establishment” (p. 2). The TFF reform and the AAT were the regime’s response to the rural instability that had even threatened the resilience of authoritarian rule by the Chinese Communist Party (CCP). However, apparently they did not improve the quality of rural governance but brought local fiscal crises, and as a result, “rural governance was gravely compromised by deteriorating rural finances” (p. 287).

This trajectory of rural tax reforms casts doubt on the premise that “the ultimate goal of market transition in China is none other than to consolidate Communist Party rule through improving the rural economy and peasants’ living standards” (p. 232). Indeed, “an array of ‘pro-peasant’ reforms over the past decade, which culminated in the AAT, has given rise to a counter-trend as well” (p. 96). Tax Reform in Rural China argues that a series of pro-peasant rural tax reforms, such as the TFF reform and the AAT, was a conscious trade-off by the central government between fiscal crises and rural instability. The premise that leaders at the CCP center in Beijing, very early in the post-Mao era, decided on a strategy of market-oriented reforms and authoritarian rule is not controversial. For the central government, paralyzed rural governance in agricultural localities caused by local fiscal crises and the lack of public goods was a less serious concern than the heavy peasant financial burden and rural unrest that local governments’ predatory extractive behavior had generated in the 1990s, which threatened both economic reforms and authoritarian rule. Thus, paralyzed rural governance does not threaten authoritarian rule so long as the center controls personnel.

Therefore, I strongly doubt the premise that the CCP has been committed to improving rural governance. The premise that “the ultimate goal of market transition in China is none other than to consolidate Communist Party rule” is noncontroversial, but the premise that it is for “improving the rural economy and peasants’ living standards” is at best debatable. Although Chen says that “this outcome [of rural reforms] may be puzzling, if not shocking, as the entire rural reform process has never spun out of the reform regime’s effective control” (p. 286), the outcome of the seemingly pro-peasant reforms would be much less puzzling once one drops the premise that the central government’s primary goal was the improvement of rural governance. Rather, as Tax Reform in Rural China argues, the central government uses local governments as a target of blame for the problems that the central government has actually created.

At the same time, the central government has a strong incentive to welcome the rise of entrepreneur cadres, “whose private wealth and market power allow them to shift their base of authority from political appointments to their private capacity to control fellow villagers by economic means” (p. 262; italics in the original). For the CCP center, the entrepreneur cadres help to improve the local economy and villagers’ living standards by bringing financial resources to rural governance. At the same time, “market transition has intensified the stratification of the rural society and placed heavier pressure on the [local] government to achieve ‘common affluence’” (p. 263). As Prosper or Perish argues, even in the localities that do not have appropriate conditions for industrialization, local governments are pressured to industrialize their areas, and as a result, unsuccessful enterprises starve local governments of revenue. This ends in paralyzed rural governance and the decline of party–state authority.

What policy implications do these findings suggest? The transformation of rural governance is apparently a product of the central government’s ad hoc, shortsighted response to the problems that might threaten the regime’s political stability, rather than one based on long-term perspectives for China’s market transition. Thus, when one problem is solved (e.g., the AAT), another, perhaps unexpected, problem emerges (e.g., local fiscal crises). To analyze the intention of China’s policymaking, it is better not to assume that the policy is made as a part of some long-term goal.