This study attempts to understand the post-reform decentralization of infrastructure investment and transfer of responsibility in China. Changes in the institutional configuration of infrastructure investment are a reflection of the ongoing process of state restructuring. Since the economic reform, infrastructure investment has transformed from being an exclusive central state-controlled operation to a central-local bargaining regime. The functions formerly exclusive to the central government are now scaling down to local governments, while scaling out to market actors. This has fuelled the formation of new partnerships in infrastructure development. However, the scaling down and scaling out processes have not led to the total retreat of the central state, nor the relaxation of state control. Using the Wuhan-Guangzhou High Speed Rail as an example, this paper investigates the inter-scalar and relational webs of multi-actor and multi-level governance in financing a major infrastructure project. Our main argument is that the state investment regime has now shifted from an exclusive, national monopoly to an intrinsic partnership, between different tiers of governments, and between the state and the market in order to meet the demands of development and to overcome the hurdles of state budget constraints.
Well known for its centralized local economic system under the national equity principle, Japan has experimented with transforming this regional redistribution system into a new local economic system of governance for more autonomous local economic growth over the past decade. This new local economic governance has been characterized by the increasing involvement of social actors, such as large private corporations and local communities, in policy processes.This dissertation reveals that new local economic growth strategies for the new local economic governance have operated under very different models in different regions of Japan, although all new local programs have been introduced under the banner of public-private partnership. New partnership programs in the local economic policy arena in the 2000s have moved toward the market model, in which local authorities pursue growth by attracting international business resources, in the major metropolitan areas around Tokyo, Osaka, and Nagoya, whereas they have moved toward the community model, in which local authorities purge growth by mobilizing local organizational resources, in the rest of Japan. The market model is embedded in market reform for deregulation that makes large private corporations' freer activities easy, whereas the community model is an attempt to strengthen the structure of endogenous networks among local authorities and local economic and social elites.This dissertation highlights two variables to explain regional variations of local economic growth strategies: dual local economic structures and diverging politico-economic coalitions. First, under the rule of Koizumi Junichiro, a coalition of promoting market reform among neoliberal politicians and large private corporations has won politically over a coalition for maintaining national equity among politicians embedded in traditional conservative center-local linkages, local business groups, and local leadership of underdeveloped areas, in national politics. The regional redistribution mechanism stopped functioning in this political choice. Instead, market reform and local community participation have been introduced as alternatives to regional redistribution mechanisms. Second, the major metropolitan areas and other underdeveloped areas, which came to stand on equal conditions for autonomous local economic growth strategies under decentralization reforms, are characterized by different situations in attracting private investment. The competitive regions of the major metropolitan areas have taken the market model as their main local economic growth strategy because they are competitive to attract private investment. In contrast, the protected regions outside the major metropolitan areas have taken the community model as their key local economic growth strategy because they have less competitive local economic structure of fading industries and scare population for attracting private investment.Over the past decade, reforms for public-private partnership in the local economic policy arena resulted in the disturbance of the Japanese way of balancing market powers and local interests in the postwar period. In the postwar period, the centralized regional redistribution mechanism, led by national politicians and central bureaucracies, functioned as a tool for social integration with consideration for national equity. However, experiments with the new form of local economic governance were not successful in balancing market reform with local community mobilization. The mobilization of local community resources could not match the political role of the regional redistribution mechanism outside the major metropolitan areas. In addition, market reform, which has been more effective in the advanced major metropolitan areas, has produced increasing regional economic disparity. Japan has faced a complicated stand-off between large private corporations detached from specific localities and local communities locked in place, which were connected by national political coordination mechanisms in the postwar period. Although each of two diverging local economic growth strategies has been effective in different regions, there was no national political mechanism for mediating local variations of these localized programs in the 2000s.
Reforms to China's education sector over the last two decades have sought to diversify the sources of funding education. This paper examines the consequences of these reforms for Chinese families and regional disparities in access to education. To illustrate the implications of education reforms for Chinese families, we draw on a large survey of urban residents across 32 Chinese cities as well as a case study of fees charged by a single secondary school in Chengdu. We argue that while China has made progress in moving towards the United Nations objective of ‘Education for All’, decentralization of China's education funding has impeded access to schooling for many, particularly those living in financially disadvantaged locales, and placed an undue financial burden on many ordinary Chinese households.
This paper assesses the sources of potential instability of China's political economy by expositing the limits of the post-Mao regime of capital accumulation in historical and comparative perspectives. It argues that the new spatial and socio-political orders under this regime, while propelling China's economic miracle, also contribute to the internalization of the global overaccumulation crisis, which has been haunting the world capitalist system since the late 1960s, into China's national economy. Whereas decentralization of regulatory authority of the state accelerates overinvestment among local economic agents, breakdown of the Maoist social compact and the subsequent class polarization foster underconsumption. The resulting structural imbalance of the economy leads to the risk of falling profit across key sectors and China's over-reliance on the export market, the expansion of which has hinged much on the debt-financed and unsustainable consumption spree in the US. A full-fledged overaccumulation crisis within China in the form of extensive bankruptcy of enterprise, surging unemployment and financial turmoil will certainly trigger extensive global repercussions, given China's weight in the global economy. This crisis, nonetheless, is not inevitable, and can plausibly be averted through a recentralization of the state's economic regulatory functions and income redistribution. No matter whether and how such a crisis unfolds, nonetheless, it is not likely to stop the shift of the center of gravity of global capitalism to Asia in the long run.
Fei Yuan, Ran Tao, Zhigang Xu, Mingxing Liu · 6 authors
Based on the theoretical literature of fiscal decentralization, we discuss the political economy of inter-governmental fiscal arrangements in China and examine how a transfer-based decentralization impacts on local public employment. A theoretical model is built to show that compared to their counterparts in better-endowed localities, local governments in worse-endowed localities that are more heavily dependent on upper level fiscal transfers to finance their spending have higher incentives to increase public employment to build local political support rather than invest in growth-promoting public goods. Using a county-level panel data set from 1994 to 2003, we empirically identify the causality from higher transfer dependency to the expansion of public employment with an instrumental variable approach. It is argued that under a governance regime in which local governments are more accountable to the upper level than to local constituency, transfer-based decentralization, either through general-purpose transfer or through earmarked transfer, would both lead to serious problems. The policy implication is that expenditure decentralization needs to be accompanied by both revenue and political decentralization to achieve better local governance outcomes.
Cities, Autonomy, and Decentralization in Japan, Carola Hein and Philippe Pelletier (eds), London and New York, Routledge, 2006, 224 pp., £65.00 (h/b) During the early years of this decade the Japanese government set out a comprehensive agenda of reforms, including cuts in public works expenditure and fiscal reforms designed to reduce the country's public sector debt of nearly US$6.4 trillion, equal to about 150 per cent of the country's gross domestic product, the worst ratio among industrial countries. The process of reform also encompassed urban and regional development as in 2003 the administration of Prime Minister Junichiro Koizumi (2001-2006) created the so-called 'Trinity Reform Package'. In this context, 'trinity' means the decentralisation reform process that involves three factors: reform of local taxes, reform of the local allocation tax grant (the redistribution of funds to local governments) and reform of tied funds and national government disbursements to cities and local prefectures more generally. These fiscal decentralisation measures are still being worked through, but are likely to be significant as Japan has pursued one of the most active and consistent centrally directed regional policies in the OECD over the past 40 years. In light of these new policies a booklength study examining the background to central-local government relations, decentralisation, and city-community relations is most welcome. Hein and Pelletier's collection of essays dates from a 2000 conference and so does not cover in depth the more recent policy initiatives (see however OECD, 2005). Nevertheless, they incorporate an evaluation of earlier moves by the Japanese government set out in the Law for the Promotion of Decentralisation, 1995 (extended by further legislation in 2000). Four essays, including the introduction provided by the editors, deal with aspects of central government-local government relations. Planning historian Ishida Yorifusa examines why Japan differs from a more decentralised model of local government planning practised in the United States, Canada and most European countries. He charts urban and regional policy-making from Meiji Japan (1968-1911) to the current decade in terms of the relative shift of power relations between the central and local governments (and citizens), noting that until Japan's first City Planning Law in 1919, local governments were primarily responsible for urban improvement schemes and local zoning ordinances. The extremely centralised system that was established in 1919 survived the democratic reforms following World War II but led eventually to more administrative (if not financial) power for local government planning enshrined in the 1968 'new' City Planning Law. Since that time, the overall tenor of land use planning in Japan has emphasised (however slowly) both increased powers for local government and citizen involvement, mirroring wider moves in other industrialised countries. Another feature of decentralisation in Japan surrounds the power of the capital, Tokyo, relative to surrounding regions. In recent years politicians and bureaucrats have favoured complete removal of national government functions away from Tokyo to districts in Japan that are (slightly) less vulnerable to earthquakes. Urban planning scholar Nakabayashi Itsuki provides a historical overview of the various schemes to manage the growth of Japan's national capital. These include the ill-fated 'greenbelt' plan of 1939 and the five National Capital Region Development Plans of the national government, as well as the local plans of the Tokyo Metropolitan Government. The removal of national capital functions away from Tokyo has now been abandoned, mainly due to opposition from the Tokyo governor, Ishihara Shintaro, and a lack of finance. …
Miu Chung Yan, Huang Xin, Kenneth W. Foster, Frank Tester
While benefiting from the wealth generated by economic reform, China has also faced increasing social and environmental problems. With the restructuring of state enterprises, the previous occupational-based welfare system has been abolished. To decentralize the state's role in social protection while tackling social problems, the Chinese government has tried to experiment with different social measures to diversify welfare financing and provisions. Included in the social experiments are non-governmental organizations and charities. This paper provides a critical analysis of the social context of China since its economic reform, which, we argue, paves the way for the current development of NGOs and charities. This overview of current development of NGOs and charities in China also highlights existing structural problems.
The usual manner of describing inequality in a population, involves income distributions. China has experienced rapid income growth, led by reforms which have exacerbated income inequalities. Other components of well-being have been affected as well. Education and health care have become less accessible due to increased costs linked to the decentralization of the financing of such services. The changing face of inequality in China is therefore not confined to income. As such this paper applies new tools to the measure of multidimensional inequalities on wages, education and health. The multidimensional aspect is critical because there may be compensating effects of one form of inequality with respect to others which can change the evolution of overall inequality. Results are submitted to the values of parameters which are included in the formulation of new indices and which translate the Chinese population's aversion to inequalities and the weight it gives to the different dimensions considered. My results show that there has been a significant increase in inequality in China between 1997 and 2000, irrespective of the dimensions one focus on, and that this increase is robust to reasonable variations in the underlying parameters.
The world is experiencing dramatic fiscal reconstruction in the socialist and (former) socialist countries and of continuing and fascinating evolution of government structure elsewhere. Being one of the fastest growing economies over the past nearly three decades, China seems deeply embracing this global mantra of power devolution in her effort to energize local economy that was suffocated in the highly constricted state-planning system. The literature of the Chinese central-local studies suggests that fiscal decentralization from the central government to provincial governments is a key institutional factor to explain Chinese economic success. However, the literature misses various lower levels of government in China. Has the fiscal power been eventually trickled down to them? This is the question addressed in this project. This project makes several contributions to the thriving Chinese central-local study. It brings back the missing local governments in the intergovernmental debate. By linking various local governments with the national government, the findings in this project help to draw a more comprehensive and holistic picture of the intergovernmental fiscal relations in China. Such a study on the evolution of fiscal structure among local governments also adds knowledge to understand the broad economic and administrative transformation in contemporary China. Using the latest datasets of public finance, this project performs a series of statistical analysis to understand if fiscal decentralization has taken place to each level of Chineselocal governments in the reform era. This project also tests the factors that have been widely identified in the classical welfare theory as explanative factors for the fiscal arrangement at different levels of local government. This project finds out that fiscal decentralization fails to capture the main trend of the intergovernmental fiscal relations at various Chinese local governments. Instead, there has been a rather consistent pattern of fiscal centralization across those local governments during the 1990s and the early 2000s.
While, politically speaking, China has a centralized government structure with strong top-down mandates, under the country’s current fiscal system, local governments are responsible for providing most local public goods and services. Large differences in economic structures and revenue bases exist, however, causing the implicit tax rate and fiscal burdens in support of local government functions to vary significantly across jurisdictions. Regions initially endowed with a broader nonfarm tax base do not need to rely heavily on new and existing firms to finance public goods provision, which creates a healthy investment environment in support of nonfarm sector growth. In contrast, local governments in regions where agriculture is the major economic activity spend the majority of their resources on their own operating costs, leaving little for public investment. Because of the relatively high transaction costs associated with collecting taxes from the agricultural sector, local governments tend to levy the existing nonfarm sector heavily, thereby greatly inhibiting its growth. As a result, regional differences in economic structures and fiscal dependent burdens may translate into widening gaps in equality. Authors' Abstract
China is one of the countries that can carry out successfully financial division of powers. Compulsory education carry out division of powers either. However, our country enormous compulsory education is undertaken by countries or villages' finance. It may be called Try to put out a burning cartload of faggots with a cup of water-an utterly inadequate measure. That children are not go to school is very common in poor rural areas. From this we can draw a conclusion that excessive division of powers in compulsory educational system is restricting the development of Chinese compulsory education.
The restructuring of the state bureaucracy deals largely with the relations between the state and market. It does not tell us how the Chinese government has used modern economic means to manage and regulate the economy. This chapter shifts to the latter aspect, focusing on the reforms in the key sectors of taxation, finance, and the enterprise system. In reforming China's fiscal and financial systems, the leadership sought to achieve two main goals. First, fiscal and financial reforms aimed to promote the development of the market economy by changing the relationship between the state and the enterprises, and second, the reforms were expected to build a modern state by managing the economy more efficiently and shifting economic power from local government to the central state. This chapter attempts to link the reforms in taxation, finance, and state-owned enterprises (SOEs) with state-building efforts by the leadership. Taxation reform and the tax regime China's fiscal system since the late 1970s has undergone a drastic transformation from a unitary system to a federal one. When the leadership first embarked on economic reform, it recognized that enterprises as well as local governments had to be provided with incentives to support the reform effort. This was achieved through fiscal decentralization. But this process augmented local autonomy at the expense of the center's fiscal capacity.
The financial reform of compulsory education in China since 1985 was characterized by fiscal decentralization and resource diversification. It has brought important benefits but did contribute to growing disparities in the quality of education across regions and to inadequate public financing of education in poor areas. This suggests that in the future, more effort needs to be put into the establishment and development of a substantial and regularized scheme of intergovernmental grants. This study, based on 1997 and 1999 county level data, attempts to document the utilization of education resources and disparities in per student spending in late 1990s. Then the study goes further to review the international experience regarding the role of intergovernmental grants in a decentralized system of financing, and finally examines the issues involved in establishing a regularized and substantial system of intergovernmental grants in compulsory education in China.
China’s educational leaders have long debated the pluses and minuses of decentralization of control and resources of China’s vast educational enterprise. During various periods of post‐1949 China, the central authorities have devolved control to the provinces, key cities, and rural communes, only to recentralize later usually due to political reforms. In this chapter various stages of the educational reform movement begun in 1985 will be considered and we will focus on what motivated the reforms in the context of China’s unique political culture. Some specific features of educational decentralization will be examined such as finance, curriculum and management. We conclude that while the current leadership appears to be committed to decentralization, they remain conflicted over the need to maintain control while at the same time respond creatively to the needs of the new market economy.
In China's fiscal system, the distinction blurs as among tax policy reform, tax administration reform, and intergovernmental fiscal reform. So linked are they that changes in any one of the three legs of the public financing structure will automatically affect the other two: all tax rates and bases are centrally determined, so structural changes have direct impacts on local as well as central government revenues; revenues from these centrally determined taxes are shared between the central and local governments, partly on a derivation basis with the retention rates varying by tax, and partly in the form of an ad hoc grant; the tax administration system is decentralized enough that local governments have derived some fiscal autonomy from a creative implementation of the tax assessment and collection system. The comprehensive fiscal reform in China in 1994 altered the structure of the major taxes, changed the responsibilities for tax administration, and modified the revenue-sharing arrangements. It also curtailed the ability of local governments to use “back-door” approaches to revenue mobilization. As a result, the entire intergovernmental system was redefined. This chapter is an attempt to evaluate the impact of these changes. In the next sections, the Chinese intergovernmental fiscal system before and after the 1994 reform is described and the underlying revenue concerns that drove the reform are considered. Most of the remainder of the chapter is an evaluation of the impacts of the 1994 reform on the intergovernmental fiscal system. A concluding section presents a summary comparison of Chinese fiscal decentralization with the world practice.
The Chinese central-provincial fiscal relationship of the reform era has been at the centre of academic attention in the last few years. It is rapidly becoming one of the most researched areas regarding China. Despite numerous publications, however, there are still some crucial issues that have not been sufficiently elucidated. First, the emphasis of discussions so far has been on formal budgetary relations, particularly the distributive pattern of revenue collection. In reality, the scope and impact of the Chinese budget are very much smaller than those elsewhere and the pattern of revenue collection is only one aspect of the multi-faceted central-provincial fiscal relationship. An appreciation of these aspects and their implications requires a better understanding of the full range of arenas in which the Chinese central government interacts with the provinces over public finance than is currently available. Secondly, it is generally accepted that the Chinese central-provincial fiscal relationship has been decentralized during the reform era, and that this change has underpinned the growing strength of the provinces and the decline in central power. However, the change in the relationship is actually more complex than one-dimensional decentralization would suggest, and the link between fiscal decentralization and political decentralization is less straightforward from a comparative perspective. Thirdly, it is widely accepted that there has been a fiscal decline in China and that the revenue-sharing system – implemented up to 1993 – was the cause of this decline. From this understanding, erroneous conclusions have been drawn. On the one hand, some scholars suggest that this decline signifies a limit on the Chinese state in its relation to the economy, and it is this factor that has underpinned the success of the Chinese economy during the reform. On the other, this decline is considered to epitomize the emergence of a “weak centre, strong localities” situation in China that may eventually lead to the disintegration of the Chinese political system. But it is far from established that there has indeed been a fiscal decline in the true sense of the term. The same can be said on the question of this decline, if it exists, representing the limiting of the Chinese state in relation to the economy or the decline of the central power relative to that of the provinces. Fourthly, in 1994 the Chinese government launched important reforms to the central-provincial fiscal relationship, aiming to replace the previous revenue-sharing system with a tax-sharing system (TSS, or fenshuizhi ), and ultimately to stem so-called fiscal decline. Despite earlier reported problems, recent official reports have claimed substantial success of this reform in terms of improvement in the so-called “two ratios” – the ratio of budgetary revenue to GDP, and the ratio of central budgetary revenue to total budgetary revenue. What do these two ratios signify? How should we interpret such success? Does the success on the one hand confirm the allegation that the revenue-sharing system was the cause of the Chinese fiscal decline? And does it on the other hand indicate a strengthening in the centre's power relative to the provinces'?
ForewordR. Scott Fosler and Shinyasu Hoshino Globalization and Decentralization: An OverviewJong S. Jun and Deil S. Wright Part I: Institutional Contexts Introduction 1. From Dual to Coercive Federalism in American Intergovernmental RelationsJohn Kincaid 2. Intergovernmental Relations in Japan: Historical and Legal Patterns of Power DistributionFukashi Horie 3. Innovative Policies and Administrative Strategies for Intergovernmental Change in JapanHiromi Muto 4. Remapping Federalism: The Rediscovery of Civic Governance in the United StatesDeWitt John, Alex Halley, and R. Scott Fosler 5. Emerging Regional Organizational and Institutional Forms: Strategies and Prospects for Transcending Localism in the United StatesJohn Kirlin 6. Understanding Regional Administration in Japan: Dynamism in Stability and Continuity in ChangeTakashi Nishio Part II: Public Policy Issues Introduction 7. The Roles of Central Government and Local Government in Japan's Regional Development PoliciesNaohisa Nagata 8. Public Infrastructure, Capital Investment, and Economic Development in the United StatesBruce McDowell 9. The Tokyo and the Development of Urban Issues in JapanAkira Nakamura 10. Metropolitan Growth and Development in the United States: Human Problems and ProspectsRalph Widner 11. Service Integration Revisited and Reinvented: The Strategic Role of Schools in Human ServicesAstrid Merget and William Colman 12. Social Welfare Issues in Japan: Meeting the Needs of an Aging SocietyAkira Morita 13. Perspectives on Intergovernmental Relations in Japan: The Problem of Solid Waste ManagementKatsumi Yorimoto 14. The Interstate Transport of Solid Waste: Intergovernmental Tensions and the Conflict Between Law and PolicyRosemary O'Leary and Paul Weiland 15. Fiscal Disparities in the United States: Concepts, Trends, and PoliciesRobert Rafuse 16. The Politics of Local Government Finance in JapanYoshio Kobayashi Part III: Internationalization and Globalization Introduction 17. State and Local Boundary-Spanning Strategies in the United States: Political, Economic, and Social Transgovernmental InteractionsJohn M. Kline 18. Technology Transfer from Iowa to Japan: Internationalization and the Quality of Life in Rural AreasKazunori Ishiguro 19. Japanese Local Government in an Era of Global Economic InterdependencyShinyasu Hoshino 20. The Domestic Consequences of Internationalization: Emerging Conflicts Enid Beaumont
Albert Park, Scott Rozelle, Christine Wong, Changqing Ren
Central-local budgetary arrangements have undergone numerous changes since the 1960s as the Chinese government in its quest for modernization has sought to balance the needs of central control and local autonomy. During the reform period, the falling tax share of GNP and a commitment to greater decentralization of the planning system led to major changes in the public finance system that have devolved expenditure responsibilities and financial authority to local governments. Fiscal decentralization has been credited with hardening budget constraints for local publicly controlled enterprises and government agencies. New budgetary relations have instilled fiscal discipline, allowing local governments to disburse more expenditures only if they generated more revenues. These reforms have helped unleash the entrepreneurial spirit of local bureaucrats, fuelling the rapid growth of rural industry.