Enhancing the redistributive capacity of the Chinese state? Impact of fiscal reforms on county finance

  • Yep R
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Abstract

Many observers contend that fiscal deprivation of the centre in reform
China is detrimental to the overall capacity of the Chinese state, and
thus the danger of national disintegration cannot be discarded. One
relevant concern here is the obligation of the state to redress
socio-economic dislocations, of which growing regional inequality is a
major issue. The Tax Sharing Scheme introduced in 1994 represents the
most colossal effort to redress the centre-local imbalance. The analysis
of the patterns of income and expenditure of county finance between 1993
and 2002, however, highlights the many facets of state capacity and
reiterates the possibility of state involvement amidst an improved
fiscal position. The success in extractive capacity in this case does
not guarantee parallel improvement in the central government's
redistributive capacity. Analysis of local expenditure patterns shows
that the growing support of the centre simply fails to reverse the
declining level of local services in areas that may be targeted as key
for poverty alleviation and equalization. The danger of the simple
reading of the rise in extractive capacity attributed to the 1994 reform
as a symptom of a strong central state is evident.

Author-supplied keywords

  • Education
  • Fiscal reform
  • Health
  • Inter-governmental transfer
  • Redistribution
  • Regional inequality poverty
  • Rural finance

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Authors

  • Ray Yep

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