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Expenditure Assignments in China

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Abstract

China has been carrying out a significant fiscal decentralization policy for over three decades. However, reforms have largely concentrated on the revenue side of budgets, and generally they have not been coordinated with an explicit strategy for the decentralization of expenditure assignments. Although significant strides have been made in the areas of tax assignments and tax administration, other areas—in particular, the assignment of government functions—have advanced much less. Yet a stable, efficient, and fair decentralized system of public finance in China will require an unambiguous and well-defined institutional framework in the assignment of expenditure responsibilities among the different levels of government. The assignment of responsibilities is by no means the only condition, but it is the most important, and it should also be the first in a well-sequenced decentralization reform effort. This chapter reviews the most important current issues surrounding the assignment of expenditure responsibilities in China. In order to put those issues in the proper perspective, an overview is provided of the general principles of expenditure assignments and the common problems encountered in the international experience. The chapter also provides a road map and practical recommendations for the reform of expenditure assignments in China.

Suggested Citation

  • Jorge Martinez-Vazquez & Baoyun Qiao, 2010. "Expenditure Assignments in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1028, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    • Handle: RePEc:ays:ispwps:paper1028
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    1. Jorge Martinez-Vazquez & Baoyun Qiao & Li Zhang, 2007. "The Role of Provincial Policies in Fiscal Equalization Outcomes in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0705, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Zhihua Zhang & Jorge Martinez-Vazquez, 2003. "The System of Equalization Transfers in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0312, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Martinez-Vazquez, Jorge & McNab, Robert M., 2003. "Fiscal Decentralization and Economic Growth," World Development, Elsevier, vol. 31(9), pages 1597-1616, September.
    4. Qiao, Baoyun & Martinez-Vazquez, Jorge & Xu, Yongsheng, 2008. "The tradeoff between growth and equity in decentralization policy: China's experience," Journal of Development Economics, Elsevier, vol. 86(1), pages 112-128, April.
    5. Wallack,Jessica & Srinivasan,T. N. (ed.), 2006. "Federalism and Economic Reform," Cambridge Books, Cambridge University Press, number 9780521855808.
    6. Bahl, Roy W. & Wallich, Christine, 1992. "Intergovernmental fiscal relations in China," Policy Research Working Paper Series 863, The World Bank.
    7. World Bank, 2002. "China - National Development and Sub-National Finance : A Review of Provincial Expenditures," World Bank Publications - Reports 15423, The World Bank Group.
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    Cited by:

    1. Roy Bahl, 2001. "Fiscal Decentralization, Revenue Assignment, And The Case For The Property Tax In South Africa," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0107, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    2. Roy Bahl, 2001. "Equitable Vertical Sharing And Decentralizing Government Finance In South Africa," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0106, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    3. Adam Wagstaff & Winnie Yip & Magnus Lindelow & William C. Hsiao, 2009. "China's health system and its reform: a review of recent studies," Health Economics, John Wiley & Sons, Ltd., vol. 18(S2), pages 7-23, July.

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