Fiscal federalism: A refined theory and its application in the Chinese context

Xingyuan FENG, Christer LJUNGWALL, Sujian GUO, Muluan Alfred WU

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Abstract

China's central–local relations have been marked by perpetual changes amidst economic restructuring. Fiscal decentralization on the expenditure side has been paralleled by centralization on the revenue side, accompanied by political centralization. Hence, our understanding of China's fiscal relations is not without controversy. This paper aims to make a theoretical contribution to the ongoing debate on ‘fiscal federalism’ by addressing crucial questions regarding China's central–local fiscal relations: first, to what extent do Chinese central–local fiscal relations conform to fiscal federalism in the Western literature? Second, are there any problems with existing principles of fiscal federalism and, if so, how to refine them? Third, how are refined principles relevant to the Chinese case and what policies should the Chinese government pursue in the future? Based on an in-depth and critical review of the theories on fiscal federalism, we develop a refined prototype of fiscal federalism. The model shows that quasi-traditional fiscal federalism is a much closer reality in China, while we argue that the refined fiscal federalism should be the direction of future reform in China. Copyright © 2013 Taylor & Francis Group, an informa business.
Original languageEnglish
Pages (from-to)573-593
JournalJournal of Contemporary China
Volume22
Issue number82
Early online dateMar 2013
DOIs
Publication statusPublished - 2013

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federalism
China
centralization
economic change
decentralization
revenue
restructuring
expenditures
reform
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Citation

Feng, X., Ljungwall, C., Guo, S., & Wu, A. M. (2013). Fiscal federalism: A refined theory and its application in the Chinese context. Journal of Contemporary China, 22(82), 573-593.