On December 24, 2005, the State Council issued the Circular on Deepening the Rural Compulsory Education Assured Funding Mechanism Reform, initiating the prologue to free compulsory education in China. Following on the heels of China's annulment of rural taxes and the implementation of the new rural cooperative medical system, the rural compulsory education assured funding mechanism is another institutional disposition that benefits hundreds of millions of farmers and constitutes a major measure for building a new socialist countryside. It is of major strategic significance for resolving the difficulties of rural education in the country's central and western regions. The New Mechanism for Assured Funding for Rural Compulsory Education (hereafter, "New Mechanism") first piloted in the central and western regions in 2006, then was put under unified implementation on a national scale in 2007, and has brought in initial results. This major educational reform that benefits more than 400,000 rural secondary and elementary schools and nearly 150 million rural compulsory education stage secondary and elementary school students need to be carefully examined from the perspective of its institutional design, the better to constantly consolidate and perfect this reform. In this article, the authors take a look at the New Mechanism's institutional design and future direction for its institutional reform. Furthermore, the authors, in view of the future direction of the funding guarantees for rural compulsory education, conclude with policy proposals for the state's improvement of the New Mechanism. (Contains 3 footnotes.) [This article was translated by Ted Wang.]