Centralization and Decentralization in China's Fiscal Management

Abstract

The economic decentralization measures introduced in the late 1950s have long been viewed as a watershed in the economic and political evolution of post-1949 China. The most widely accepted interpretation is that these edicts transferred broad economic powers from the Centre to the provincial governments and that, as a result, the ability of the central government to control the allocation of the nation's economic resources was substantially impaired. This fundamental realignment in the internal balance of economic power is, in turn, viewed as having far-reaching implications for China's capacity for national economic planning and for a broad range of other important issues related to our understanding of China's developmental experience.

Organization, Growth, and Equality In Xiyang County

“…We feel that this is to some extent the case in China. Nicholas Lardy has explored this proposition for the national level (Lardy, 1978). In terms of the local level, an unexpected opportunity for field research in Dazhai and Xiyang in 1977 enabled us to collect some data which document a pattern of change in which rapid economic growth has been accompanied by a reduction of economic inequality both within each brigade and among the brigades in the county from the mid-1960s to 1976.…”

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

“…The Lardy-Donnithorne debate in the 1970s demonstrates the complexity of the issue. Lardy (1975 and1980) argues that effective state control over financial resources and income distribution did help reduce regional inequality in Mao's China. In contrast, Donnithorne (1972 and1976) contends that Mao's emphasis on decentralization and self-sufficiency had in fact offset the redistributive effect of various state policies, and consequently regional inequality lingered (Loo 1998).…”

Regional inequality in China

“…Influenced by socialist ideology and egalitarian ideas, Mao tried to develop the backward inland areas and to reduce regional inequality. Most maintain that regional inequality declined as a result of the implementation of distributive policies, especially inter-regional resource transfers to interior regions through centralized fiscal and investment systems (Lardy, 1975;1978;Paine, 1981;Wu, 1987;Guo, 1988;Pannell, 1988;Yang, 1990). The interaction between the coast and the interior was one of the 'ten great relationships' proposed by Mao (1956).…”