We argue in this paper that unless China begins to tackle more systematically the serious problems that have emerged in the finances of its various levels of sub-national government the problems to which the present unsatisfactory system give rise will over time increasingly distort resource allocation, increase distributional tensions, and slow down the impressive recent growth of the Chinese economy. Despite the lack of solid and reliable information on the size and nature of China?s real fiscal system, we show that the evidence available is generally consistent with this pessimistic reading. China?s fiscal and ? in time ? economic future thus rests to some extent on reforms to key aspects of its fiscal system, especially its intergovernmental finances. Moreover, a more consistent and purposive framework to this complex of problems seems needed. Given the scale and scope of China?s underlying public finance problems, the ?reactive gradualism? evidenced in recent ad hoc reforms to this or that piece of the fiscal system has, we suggest, run its course.
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Paper provided by International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto in its series International Tax Program Papers with number
0515.
Find related papers by JEL classification: H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government H70 - Public Economics - - State and Local Government; Intergovernmental Relations - - - General O53 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East P21 - Economic Systems - - Socialist Systems and Transition Economies - - - Planning, Coordination, and Reform
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