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Has Fiscal Federalism Worked for Macroeconomic Purposes? The Chinese Experience 1994–2003
Author(s) -
He Liping
Publication year - 2008
Publication title -
china and world economy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.815
H-Index - 28
eISSN - 1749-124X
pISSN - 1671-2234
DOI - 10.1111/j.1749-124x.2008.00097.x
Subject(s) - fiscal federalism , economics , fiscal imbalance , china , revenue , government (linguistics) , fiscal union , economic policy , government revenue , federalism , tax revenue , fiscal policy , international economics , macroeconomics , finance , market economy , decentralization , political science , linguistics , philosophy , politics , law
China's central government undertook major tax regime reform in 1994 that was characterized by fiscal federalism. In hindsight, this reform might be viewed as being more emphatic towards the revenue side than the expenditure side. The reform has resulted in certain success both for revenue shifting and inflation fighting purposes. However, the reform and its subsequent follow‐ups have not addressed some fundamental issues pertaining to China's government finance system, such as the overhauling of the function of government finance and redrawing lines between the central and regional governments with regard to their fiscal responsibilities and duties. Moreover, fiscal federalism might have actually increased fiscal burden on the economy, especially on domestic sectors of the economy. However, coupled with enhanced policy support for China's external development, fiscal federalism might have helped to further accelerate resource shifts toward the external sector, thus resulting in an unprecedented rapid expansion in China's exports since the mid‐1990s.