Fiscal Competition between Local Governments in the Process of China' s Market-oriented Economic Reform

Abstract

Local government fiscal competition means a series of fiscal activities competing for various economic resources taken by local governments by means of finance in order to enhance the economic power and improve the potential welfare of the regions. Local government fiscal competition includes expenditure competition and tax competition, whose theoretical basis is fiscal decentralization theory. At the different stages of a national e-conomic development, the manifestation of local government fiscal competition is different. China has experienced the fiscal competition characterized mainly by tax competition toward the fiscal competition including tax competition and expenditure competition as well since reform and opening-up. With her access to the WTO and further fiscal decentralization, the expenditure competition is getting more and more important. Based on fiscal competition , the paper attempts to analyze China's economic reform of market from a new approach.