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China's Local Public Finance: Navigating a Complex and Dynamic Landscape

Jese Leos
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Published in China S Local Public Finance In Transition
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China s Local Public Finance in Transition
China's Local Public Finance in Transition
by James D. Fry

4.7 out of 5

Language : English
File size : 10676 KB
Text-to-Speech : Enabled
Screen Reader : Supported
Enhanced typesetting : Enabled
Word Wise : Enabled
Print length : 300 pages
Lending : Enabled

The local public finance system in China has undergone dramatic transformations over the past decades, playing a critical role in the country's economic and social development. This article delves into the intricacies of this complex system, exploring its evolution, challenges, and the path ahead.


Historical Evolution

China's local public finance system has its roots in the early days of the People's Republic of China. During the command economy era, local governments relied heavily on fiscal transfers from the central government. However, the economic reforms initiated in the late 1970s and early 1980s introduced significant changes.

Fiscal decentralization became a key element of the reform agenda, with local governments gaining greater autonomy in revenue generation and expenditure allocation. This shift aimed to foster local economic growth and innovation.


Intergovernmental Relations

Intergovernmental relations play a pivotal role in China's local public finance system. The central government exerts significant influence through mechanisms such as fiscal transfers, tax sharing, and regulations.

Local governments have varying degrees of autonomy, depending on their economic development level, fiscal capacity, and political factors. The relationship between central and local governments is often characterized by negotiation and bargaining, as they seek to balance their respective interests.


Revenue Structure

Local governments in China generate revenue from various sources, including:

  1. Tax revenue: Local governments collect a range of taxes, including business income tax, individual income tax, and property tax.
  2. Non-tax revenue: This includes fees, charges, and fines. Local governments also engage in land-related transactions, which can generate significant income.
  3. Fiscal transfers: The central government provides fiscal transfers to local governments to supplement their revenue base and support regional development.


Expenditure Patterns

Local governments in China allocate their expenditures across a wide range of areas, including:

  1. Public services: Education, healthcare, and social welfare are key areas of local government spending.
  2. Economic development: Local governments invest in infrastructure, industrial development, and other initiatives to promote economic growth.
  3. Administrative expenses: These include salaries, pensions, and other costs associated with government operations.


Fiscal Sustainability

Fiscal sustainability remains a key concern for China's local public finance system. Local governments have often relied on off-budget financing mechanisms, such as local government debt, to fund their expenditures.

Excessive debt levels and rapid growth in local government debt have raised concerns about potential fiscal risks. Efforts are underway to strengthen fiscal discipline and promote long-term sustainability.


Public Service Provision

The quality and effectiveness of public service provision are central to local public finance in China. Local governments play a crucial role in delivering essential services to their citizens.

Challenges include the need to improve service quality, address regional disparities, and ensure equitable access to public goods and services.


The Road Ahead

China's local public finance system is expected to continue evolving in the years ahead. Key areas of focus include:

  1. Fiscal reform: Further refinement of the fiscal system to enhance efficiency, transparency, and accountability.
  2. Debt management: Strengthening fiscal discipline and reducing local government debt risks.
  3. Public service improvement: Raising the quality and accessibility of public services to meet the growing needs of citizens.


China's local public finance system is a complex and dynamic landscape, shaped by historical, economic, and political factors. With its ongoing evolution, the system faces both challenges and opportunities.

By navigating these complexities and embracing innovation and sustainability, China can harness the power of local public finance to support its economic and social development goals.

© Copyright 2023. All Rights Reserved.

China s Local Public Finance in Transition
China's Local Public Finance in Transition
by James D. Fry

4.7 out of 5

Language : English
File size : 10676 KB
Text-to-Speech : Enabled
Screen Reader : Supported
Enhanced typesetting : Enabled
Word Wise : Enabled
Print length : 300 pages
Lending : Enabled
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China s Local Public Finance in Transition
China's Local Public Finance in Transition
by James D. Fry

4.7 out of 5

Language : English
File size : 10676 KB
Text-to-Speech : Enabled
Screen Reader : Supported
Enhanced typesetting : Enabled
Word Wise : Enabled
Print length : 300 pages
Lending : Enabled
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