Into the Trap of Strengthening State Capacity: China's Tax-Assignment Reform

Lee, Pak K.

doi:10.1017/s0305741000019275

Cited by 50 publications

(18 citation statements)

References 34 publications

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“…The percentage of total central subsidies in this category increased from 18.29 (48.88 billion yuan) in 1996 to 30.84 (144 billion yuan) in 2000, and to 53.6 in 2002. These grants even exceeded tax rebates to become the largest central subsidy (Lee, 2000;X. Li, Du, and Jin, 2004;Caizhengbu, 2001: 43;W.…”

Section: The County's Fiscal Loss and Central Subsidiesmentioning

confidence: 99%

“…Scholars disagree on how to explain such a wide gap. Lee (2000) argues that the proportion of central revenue in the state's total dropped from 28.99 percent in 1993 to 25.16 percent in 1998 mainly because of the center's inter-governmental transfers of which the tax rebate was by far the largest. Shaoguang Wang (1997) identifies large central refunds for making up the provinces' losses under the new system as accountable for the gap.…”

Section: Notesmentioning

confidence: 99%

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The 1994 Tax Reform and Its Impact on China's Rural Fiscal Structure

Chen

2008

Modern China

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This article analyzes the fiscal crisis at the township level and the related worsening of the peasant burden that was predominantly caused by the 1994 tax reform. This reform changed the tax-sharing rules in favor of the central government. The pressure for performance under tighter fiscal constraints drove local officials to replicate the central government's "self-serving" policy and to desperately attempt to balance their budgets at the cost of their subordinate jurisdictions. Located at the bottom of the administrative hierarchy, the township had no subordinate governments to absorb its fiscal losses or contribute to its coffers. Diminished sources of revenue compelled township officials to squeeze the peasants even harder, particularly in the agricultural provinces. While the tax-for-fee reform and the repeal of the agricultural tax eliminated most of the burden on the peasants, the fundamental structural problem with rural finance not only still exists but also is getting worse.

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Section: The County's Fiscal Loss and Central Subsidiesmentioning

confidence: 99%

Section: Notesmentioning

confidence: 99%

The 1994 Tax Reform and Its Impact on China's Rural Fiscal Structure

Chen

2008

Modern China

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“…The and speculation in property and security markets in 1992-93, the central leadership had called for strengthening macroeconomic control by the central government since April 1993 (Lee, 2000(Lee, : 1011. The decision of the Third Plenary Session of the 14th Central Committee of the CPC, held in November 1993, marked the advent of a crucial phase of banking reform in China with an aim to resolve the problems of bad loans.…”

Section: Banking Reform Of 1994: Restraints On the Local Governmentsmentioning

confidence: 99%

Bad Loans Versus Sluggish Rural Industrial Growth: A Policy Dilemma of China's Banking Reform

Kwong

Lee²

2005

Journal of the Asia Pacific Economy

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The gross output value of China's rural industry grew rapidly from 38.5 billion yuan in 1978 to 8245.6 billion yuan in 2000. An average annual growth rate of 21.8 percent, measured in real terms, was recorded for the rural industry for the period. One of the plausible reasons put forward by scholars to account for such spectacular growth is the supportive role of the local government in diverting bank loans to the enterprises under their jurisdiction. This practice had been conducive to initial start-up of the enterprises and their future expansion when China's financial market had been underdeveloped in the mid-1980s. Nevertheless, to curb an excessive credit expansion by local banks, China's banking reform of 1994 has insulated local governments from influencing on lending to local enterprises. It is argued and demonstrated that the efficiency-enhancing banking reform has been implemented at the expense of the flow of financial resources to rural enterprises. It unveils a policy dilemma as to whether to leave the bad debts of the banking sector unresolved or to undermine the robust growth of rural enterprises. Policy implications of the banking reform include the negative impact on labour employment in the countryside and local finance.

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“…In terms of figure 1, therefore, provincial legitimacy had soared to unprecedented levels, largely because of the enthusiastic nature of devolutionary initiatives. Furthermore, the importance of the provinces was compounded by the introduction of negotiation-based fiscal contracting between the provinces and the centre at the end of the 1980s (Lee, 2000(Lee, , pages 1009(Lee, ^ 1015, which allowed certain states, especially the richer ones, to exploit their bargaining positions to a far greater extent than under the previous formulabased revenue-sharing contracts. The impacts of this rise in the power of the provinces in relation to the centre soon became evident.…”

Section: Differing Forms Of Devolutionmentioning

confidence: 99%

“…Alongside this, as figure 2 illustrates, the central government's share in public expenditure fell steadily, from around 53% in 1982, to under 30% in 1998, hindering macroeconomic control and prompting emergency widespread fiscal reforms in 1994 (Bahl, 1999, pages 105 ^ 129). Although these fiscal reforms succeeded in increasing the centre's involvement in revenue raising, Lee (2000Lee ( , pages 1009Lee ( ^ 1015 documents the influence the provinces had in preserving their expenditure levels, undermining the centre's equilibrating efforts. But, although resources have been decentralised, many subnational governmental responsibilities, in accordance with the marketisation of China, have been discontinued, including large areas of responsibility over state-run enterprises.…”

Section: Differing Forms Of Devolutionmentioning

confidence: 99%

The Global Trend towards Devolution and its Implications

Rodríguez‐Pose

Gill

2003

Environ Plann C Gov Policy

272

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Globalisation has been accompanied by an equally global tendency towards devolution of authority and resources from nation-states to regions and localities that takes on various forms, depending upon which actors are driving the decentralisation efforts. The existence of a general trend towards devolution also has significant implications for efficiency, equity, and administration. The authors outline first the general drive towards devolution and then proceed to examine which countries are experiencing which forms of decentralisation. A theoretical argument emphasising the role of governmental legitimacy across various tiers of government is used to explain the diversity of devolution initiatives, drawing on examples that include Brazil, Mexico, India, China, the USA, and some European countries. Having supported their model of decentralisation, the authors then examine the implications of the widespread downward transfer of power towards regions. Some of the less widely discussed pitfalls of decentralisation are presented; caution in promoting devolutionary efforts is the prescription of this paper.

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Into the Trap of Strengthening State Capacity: China's Tax-Assignment Reform

Cited by 50 publications

References 34 publications

The 1994 Tax Reform and Its Impact on China's Rural Fiscal Structure

The 1994 Tax Reform and Its Impact on China's Rural Fiscal Structure

Bad Loans Versus Sluggish Rural Industrial Growth: A Policy Dilemma of China's Banking Reform

The Global Trend towards Devolution and its Implications

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