On Establishing a Transfer Payment System in China

The transfer payment system has long existed in China. In the past, transfer payment assumed various forms, including institutional subsidies or general subsidies [>i>tizhi buzhu>/i>], special appropriations [>i>zhuanxiang buzhu>/i>], emergency subsidies [>i>teshu buzhu>/i>], institutional remittances [>i>tizhi shangjie>/i>], and special remittances [>i>zhuanxiang shangjie>/i>], all of which were used to equilibrate budgetary margins among levels of government. A more formal use of "transfer payment" as a standard financial practice in China has, however, only been discussed in recent years. The new fiscal system implemented in 1994 allowed the central government to concentrate more revenue resources, but expenditure management has not been revised and still follows the same operating pattern as under the old fiscal system. Furthermore, regional disparities in economic development in the past years have grown, and financial difficulties in poor areas have worsened. Under these circumstances, the establishment of a transfer payment was put onto the agenda of the central and local financial management institutions. How to standardize the transfer payment system in China is seen, by all levels of government, as an important solution to financial difficulties and disequilibrium in distribution.