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China?s Fiscal System: A Work in Progress

Author

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

    () (Rotman School of Management, University of Toronto)

Abstract

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.

Suggested Citation

  • Christine C.P. Wong & Richard M. Bird, 2005. "China?s Fiscal System: A Work in Progress," International Tax Program Papers 0515, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
  • Handle: RePEc:ttp:itpwps:0515
    as

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    File URL: http://www-2.rotman.utoronto.ca/iib/ITP0515.pdf
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    References listed on IDEAS

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    1. Bubnova, N. & Way, L., 1998. "Trends in Financing Regional Expenditures in Transition Economies. The Case of Ukraine," World Bank - Discussion Papers 378, World Bank.
    2. Wong, Christine P. W. (ed.), 1997. "Financing Local Government in the People's Republic of China," OUP Catalogue, Oxford University Press, number 9780195900279.
    3. 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.
    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. Raju J Singh & Ben Lockwood & Ehtisham Ahmad, 2004. "Taxation Reforms and Changes in Revenue Assignments in China," IMF Working Papers 04/125, International Monetary Fund.
    6. 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.
    7. 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.
    8. Richard Bird & Joosung Jun, 2005. "Earmarking in Theory and Korean Practice (2005)," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper0515, 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.
    10. 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.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Das-Gupta, Arindam, 2014. "Fiscal Resources for Inclusive Growth," ADB Economics Working Paper Series 416, Asian Development Bank.
    2. Richard M. Bird, 2006. "Taxing Land and Property in Emerging Economies: Raising Revenue...and More?," International Tax Program Papers 0605, International Tax Program, Institute for International Business, Joseph L. Rotman School of Management, University of Toronto.
    3. Santaeulàlia-Llopis, Raül ; Zheng, Yu, 2016. "The Price of Growth: Consumption Insurance in China 1989-2009," Economics Working Papers ECO2016/13, European University Institute.
    4. Petra Persson & Ekaterina Zhuravskaya, 2016. "The Limits Of Career Concerns In Federalism: Evidence From China," Journal of the European Economic Association, European Economic Association, vol. 14(2), pages 338-374, April.
    5. Li, Lixing, 2011. "The incentive role of creating "cities" in China," China Economic Review, Elsevier, vol. 22(1), pages 172-181, March.
    6. Elliott Parker & Judith Thornton, 2007. "Fiscal Centralisation and Decentralisation in Russia and China," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 49(4), pages 514-542, December.
    7. 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.

    More about this item

    Keywords

    China; intergovernmental finance; taxation; budget;

    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, Innovation, 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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