Chapter 5:
职务有哪些
Soft-Budget Constraint on Local Governments in China
Jing Jin and Heng-fu Zou
多想有你在身边视频拍摄方案I. Introduction
A significant feature of China’s economic reform since 1978 is the devolution of the central government’s control over the economy to subnational gove rnments. The fiscal system is decentralized among five levels of government: national, provincial, municipal, county, and township governments, which are broadly categorized into center, provincial, and local governments (all sub-provincial governments). This paper mainly focus on soft-budget constraints in the relationship between the central government and the provinces. The term “local” and “subnational” refers to the provincial level or aggregated subnational governments, unless otherwi specified.
China’s subsidy, taxation, credit and administrative pricing systems are all subject to soft budget constraints. Prior to 1994 under the Chine fiscal regime, the collection of all taxes and profits followed the pre-reform pattern: local government collections were remitted to the center and then tran
sferred back to the provinces according to expenditure needs approved by the center. Policymakers in the central government decided what type of revenues should be collected and how the revenues were to be reallocated for national and local public good provisions. Most expenditures at subnational levels were financed by central transfers and complemented by a few lf-retained local tax receipts. The prereform fiscal system resulted in a fundamental lack of incentives and efficiency, which became the major concern of the central authorities. In the 1980s, a ries of reforms were implemented to revamp the fiscal relations
凉粉怎么做好吃between the central and subnational governments. A lthough incentives to spur tax collection efforts by local governments were successful to a certain extent,1 they also reduced the share of revenues pasd on to the central government. Before the 1994 tax system reform, the central government’s share of t otal revenue declined from 44 percent in 1978 to 23 percent in 1993, while the total subnational revenue share incread from roughly 56 percent to 77 percent during same period. At the same time, the consolidated government revenue share in GDP also shran k from 47 percent in 1978 to 13 percent in 1993. Despite the fact that fiscal decentralization in the 1980s shifted more resources to local governments in terms of its incread share in total revenues, the shrinking pie also considerably reduced the budgetary resources allocated at the provincial level (Table 1).
1 Unlike the previous system, reform in the 1980s allowed provincial authorities to retain all or a proportion of the
tax collected after sharing with the center.
陈毅的诗Throughout the 1980s, the central government’s inability to cut spending to stay within declining revenue created persistent budget deficits, which contributed to mounting inflationary pressures. At the same time, subnational governments faced greatly expanded expenditure responsibilities stemming from obligations impod by national policy (Wong, 1991). As the central government responded to fiscal pressure by attempting to devolve expenditure responsibilities to lower levels of government, it left provincial governments starved for revenues. Apart from the intensified bargaining between central and local governments over the sharing schemes, fiscal pressures created by the contract system of the 1980s led to undesirable respons by subnational governments. Examples include the diversion of resources from budgetary to extrabudgetary channels, the duplication of industries to capture r evenues that formerly flowed to the national treasury, generous tax concessions to local state-owned enterpris (SOEs) under their own jurisdictions, and expanded local bank lending to the SOEs. All the measures circumvented the central government’s efforts to impo hard budget constraints and weakened overall financial discipline.
As the country moved toward economic federalism with the fiscal decentralization marked by a continuous decline of government revenue as a percentage of n ational income, the unitary political system was also transformed and decentralized. Even though the central bureaucratic hierarchy con
tinued to lect, assign, and promote top provincial cadres (Huang, 1996), since 1983, bureau level officials (e.g., the heads of provincial fiscal bureaus and the managers of provincial branches of national banks) have been lected by provincial governments and appointed by the corresponding level of the People’s Congress. No central approval is required. Driven by common economic
摄影术语interests and the pressure to ek growth, which is the most important measure of their political performance, the directors of fiscal and banking agencies tend to “stand where they sit” rather than delegate their central line administrators. As a result, the former hierarchical management has been considerably weakened and increasingly transformed into horizontal administration featured by a highly fragmented economy. The central authority’s attempt to strengthen the hierarchical management-- by strengthening personnel management at the level of provincial party cretaries and governors-- thus may not necessarily be able to penetrate the horizontal coalitions increasingly shaped by common interests and contiguity at the subnational level. According to Yang (1997), the heads of faster-growing provinces now tend to be promoted more quickly than otherwi would be. Bo (1996) also finds that provincial leaders of more populous and richer provinces are more likely to be promoted than tho in less populous and less developed ones.
This paper outlines some major economic and administrative mechanisms that undermine the centra
l government’s endeavor to harden the budget constraint on provincial governments. Section II describes briefly the evolution of China’s intergovernmental fiscal relations in the post-reform period. Section III prents the major channels of soft budget constraints on provincial governments. Section IV concludes.
II. The Evolution of Intergovernmental Fiscal Relations from the 1980s through the
纪翔1990s
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