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4.1 The Use of RemittancesUndoubtedly, the reforms of the late 1970s and early 1980s stimulated ruraleconomic growth and increased rural household income. But they alsobrought about change, and in some cases, the demise of some longstandingand effective rural institutions, placing a much heavier economic burdenon rural households. Rural policies on basic education and health care aretwo important examples of this, and the rolling back of public provisionof these services correlates closely with remittances. In addition, taxationand the rural finance policy have also had an impact on the effective useof remittances.Basic EducationCurrent policies on basic education in rural areas were instituted in themid-1980s, when the government clarified the respective responsibilitiesof the central and local governments and rural communities 6 (Cai et al.2004, 226). This institutional arrangement was intended to mobilize variousdifferent resources to support basic education. In fact, whether directly orindirectly, rural households have been forced to assume a large part of thecost, especially in rural parts of central and western China, where localindustry is less developed than eastern China, and local taxation to supportpublic expenditure (for such as teachers’ salaries, school infrastructure,etc.) must mainly depend on agricultural production. While the cost ofbasic education has gone up annually with the rising price of textbooks,stationary, equipment and teachers’ salaries, growth in rural householdincome from agriculture has been sluggish since the mid-1990s (see Figure3). Clearly, rural households must seek other sources of income to coverthe cost.2286The responsibilities are as follows: The central government issues the policies andhelps poor areas improve their basic education; provincial governments manage andmonitor the implementation of the policies; county governments are responsible forprogramming and financing all the countys basic education; township governmentsmust establish a department to raise and manage funds for education; villages have theresponsibility to build up and maintain their schoolhouses, pay for informal teachers,manage school assets, mobilize children to enroll, and participate in administration ofschools.