Local Fiscal Autonomy in China: Historical Evolution and Hierarchical Differences, 1990–2014

Abstract

Local fiscal autonomy has a great influence on government behavior. However, there are substantial regional gaps and hierarchical differences in local fiscal autonomy in China. On the whole, although for many years most of China’s counties have enjoyed little fiscal autonomy, counties in the east have gradually won increased autonomy. Counties in the central and western regions, however, have continued to lose fiscal autonomy. Some have even lost the most basic level and now rely on transfer payments from higher-level governments for most of their local public expenditures. County expenditures make up the majority of national expenditures. Therefore, a low level of county fiscal autonomy impedes China’s county-based fiscal system reform and has a marked impact on government behavior and local governance.