Editor's Introduction

Fiscal reform has been at the center of many debates in recent years in China, particularly the debates concerning centralâlocal relations. Beginning in 1994, China began to implement a "tax-sharing system" to replace the fiscal contracting system it had employed throughout the reform era. The tax-sharing system established a national tax system separate from the local tax offices of the provinces, though many concessions to provincial interests made it questionable whether the central government would be able to tax the revenue sources it hoped to tax. >i>Chinese Economic Studies>/i>, vol. 28, nos. 3 and 4 (MayâJune and JulyâAugust 1995) published a full translation of Hu Angang and Wang Shaoguang's influential 1993 report, >i>Jiaqiang zhongyang zhengfu zai shichang zhuanxing zhong de zhudao zuoyong: Guanyu Zhongguo guojia nengli de yanjiu baogao>/i> (Strengthen the Leading Role of the Central Government in the Transition to the Market: A Research Report on China's State Capacity). This report, which strongly advocated abandoning fiscal contracting in favor of tax sharing and raised fears that China might face political disintegration if it did not take immediate steps to increase the capacity of the central government, became a focal point in these debates.