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China?s Fiscal System: A Work in Progress

  • Christine C.P. Wong
  • Richard M. Bird

    ()

    (Rotman School of Management, University of Toronto)

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.

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Length: 41 pages
Date of creation: Oct 2005
Date of revision:
Handle: RePEc:ttp:itpwps:0515
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  1. Richard M Bird & Joosung Jun, 2005. "Earmarking in Theory and Korean Practice," International Tax Program Papers 0513, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  2. Bubnova, N. & Way, L., 1998. "Trends in Financing Regional Expenditures in Transition Economies. The Case of Ukraine," World Bank - Discussion Papers 378, World Bank.
  3. Raju Jan Singh & Ben Lockwood & Ehtisham Ahmad, 2004. "Taxation Reforms and Changes in Revenue Assignments in China," IMF Working Papers 04/125, International Monetary Fund.
  4. Richard M. bird, 2003. "Taxation in Latin America: Reflections on Sustainability and the Balance between Equity and Efficiency," International Tax Program Papers 0306, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  5. Zhou, Huizhong, 2000. "Fiscal decentralization and the development of the tobacco industry in China," China Economic Review, Elsevier, vol. 11(2), pages 114-133, December.
  6. Roy Bahl & Jorge Martinez-Vazquez, 2003. "Fiscal Federalism and Economic Reform in China," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0313, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
  7. Wong, Christine P. W. (ed.), 1997. "Financing Local Government in the People's Republic of China," OUP Catalogue, Oxford University Press, number 9780195900279, March.
  8. 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.
  9. International Monetary Fund, 2004. "Toward More Effective Redistribution; Reform Options for Intergovernmental Transfers in China," IMF Working Papers 04/98, International Monetary Fund.
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