Compulsory education in China's rural areas has come a long way since China adopted the policy of reform and opening up to the outside world toward the end of 1978. By 2004, compulsory education had become available and illiteracy had been eliminated among 93.6 percent of the nation's total population; the enrollment rate of school-age children had reached 98.6 percent, and the gross enrollment rate of junior middle school youngsters had reached 94.1 percent. In 2004, the Chinese government's budgetary appropriation for rural compulsory education totaled RMB132.6 billion, which was RMB79.3 billion more than in 1999 (the year prior to the rural tax reform), accounting for 76.6 percent of the nation's total spending on rural compulsory education at RMB164.5 billion, and an 18.8 percent increase over the 1999 figure. On December 23, 2005, the State Council issued the Circular on Reform of Rural Compulsory Education Assured Funding Mechanism. The circular stipulates bringing rural compulsory education entirely within guaranteed public finance mechanisms and establishing an assured funding framework whereby spending on rural compulsory education is shared between the central government and local authorities proportionately and by categories. This milestone decision is a major policy choice made after repeated changes have taken place in the rural compulsory education financing system in the fifty-seven-year history of the People's Republic and the thirty-year history of reform and opening up to the outside world. This article describes the development of rural compulsory education finance in China. (Contains 1 figure.)