Strategy for fiscal survival? Analysis of local extra-budgetary finance in China

Journal of Contemporary China

Volumn 22, Issue 80, 2013, Pages 185-203

  Zhan, Jing Vivian ^a  

^a CHINESE UNIVERSITY OF HONG KONG   (Hong Kong)

Author keywords

[No Author keywords available]

Indexed keywords

BUREAUCRACY; FINANCIAL SYSTEM; FISCAL POLICY; LOCAL GOVERNMENT; PANEL DATA; REFORM PROCESS;

CHINA;

EID: 84873719244     PISSN: 10670564     EISSN: 14699400     Source Type: Journal    
DOI: 10.1080/10670564.2012.734077     Document Type: Article

References (40)

1. Feizhou Zhou and Yang Zhao, 'Pouxi Nongcun Gonggong Caizheng: Xiangzhen Caizheng de Kunjing he Chengyin' ['Analyzing rural public finance: township fiscal predicaments and causes'], Zhongguo Nongcun Guancha [Rural China Observations] 4, (2003).
2. Zhimei Chen, Zhongguo Xianxiang Caizheng Fengxian Wenti Yanjiu [Research on County and Township Fiscal Risks in China] (Beijing: Renmin Publishing House, 2007).
3. Jean C. Oi and Shukai Zhao, 'Fiscal crisis in China's township: causes and consequences', in Elizabeth Perry and Merle Goldman, eds, Grassroots Political Reform in Contemporary China (Cambridge, MA: Harvard University Press, 2007), pp. 75-96.
4. The statistics are compiled based on data from the Finance Yearbook of China 1992-2010 [Zhongguo Caizheng Nianjian 1992-2010].
5. Richard Allen and Dimitar Radev, 'Managing and controlling extrabudgetary funds', OECD Journal on Budgeting 6(4), (2006), pp. 7-36.
6. Jing Vivian Zhan, 'Undermining state capacity: vertical and horizontal diffusions of fiscal power in China', Asian Politics & Policy 1(3), (2009), pp. 390-408.
7. Shaoguang Wang, 'The rise of the regions: fiscal reform and the decline of central state capacity in China', in Andrew G. Walder, ed., The Waning of the Communist State: Economic Origins of Political Decline in China and Hungary (Berkeley, CA: University of California Press, 1995), pp. 87-113.
8. Thomas P. Bernstein and Xiaobo Lu, Taxation without Representation in Contemporary Rural China (Cambridge: Cambridge University Press, 2003).
9. Jia Kang and Quanhou Zhao, Zhonggguo Jingji Gaige Sanshi Nian/Caizheng Shuishou Juan 1978-2008 [Thirty Years of Economic Reform in China/Finance and Taxation 1978-2008] (Chongqing: Chongqing University Press, 2008), pp. 289-290.
10. State Council, 'Guanyu Jiaqiang Yusuanwai Zijin Guanli de Jueding' [Decision on Strengthening the Management of Extra-Budgetary Fund] (1996), available at: http://www.gdczt.gov.cn/documents/lib1/200004032796.htm (last accessed 3 February 2008).
11. Administrative charges are charges on targeted citizens or legal persons by government departments, agencies, and social groups when conducting public administration or providing certain public services. A wide range of government departments, including public security, industrial and business administration, public health and environmental protection etc., are authorized to collect administrative charges. An example is fees for granting professional certificates.
12. Earmarked government funds are charges by governments and relevant government departments on citizens, legal persons or other organizations in support of certain causes and for designated uses. Examples include educational surcharge and management fee for land appropriation.
13. Remittances of administrative departments are management fees or other funds collected by administrative departments from their subordinate enterprises, agencies, and social institutions.
14. Funds raised by township governments and their agencies from township and village enterprises, land users, and individuals, etc. Examples include funds raised for rural education, birth control work and infrastructure construction.
15. Other fiscal incomes of administrative departments and agencies not included in budgetary management, such as donations to governments and profit return or interest income of extra-budgetary funds.
16. Besides the redefinition of EBR and elimination of special funds for enterprises (qiye zhuanxiang zijin) as discussed above, the Ministry of Finance conducted two nationwide inspections, one focusing on the charges imposed on peasants, and the other on administrative fees. According to the report in the Finance Yearbook of China, the first inspection, conducted together with the Ministry of Agriculture, terminated charges on peasants worth nearly 0.7 billion yuan. in the second inspection, the Ministry of Finance abolished 143 types of fees, 22 other central ministries cancelled 450 kinds of fees, and the 30 provinces also exterminated 5,227 illicit charges, which altogether accumulated to 7 billion yuan.
17. Growth rates calculated according to statistics provided by the Finance Yearbook of China 1992-2010.
18. Bernstein and Lu, Taxation without Representation in Contemporary Rural China.
19. Mingxing Liu and Ran Tao, 'Local governance, policy mandates, and fiscal reform', in Vivienne Shue and Christine Wong, eds, Paying for Progress in China: Public Finance, Human Welfare and Changing Patterns of Inequality (New York: Routledge, 2007), pp. 166-189.
20. Author's interviews in Jiangxi Province, 2011.
21. Ran Tao, Mingxing Liu, Fubing Su and Xi Lu, 'Grain procurement, tax instrument and peasant burdens during China's rural transition', Journal of Contemporary China 20(71), (2011), pp. 659-677.
22. for example, Wu Jinglian, 'Fazhan zhong xiao qiye shi zhongguo de da zhanlue' ['Developing small-and-medium enterprises as China's grand strategy'], Hongguan Jingji Yanjiu [Macroeconomics] no. 7, (1999), pp. 3-7.
23. State Council, 'Guanyu zhili xiang geti siying deng feigongyouzhi qiye luanshoufei, luanfakuan he gezhong tanpai de wenti de tongzhi' ['Notification concerning disorderly charges, fines, and apportionments targeting non-public enterprises'], Guojianfu [2005]2, (9 June 2006), available at: http://www.gov.cn/ztzl/2006-06/09/content_305620.htm (last accessed 15 February 2011).
24. Liu Shixin, 'Guojia yu dong jiceng nailao: Chuizhi guanxi nengfou guanzhu luanzheng tudi?' ['The state taps on grassroots governments: can vertical management curb disorderly land expropriations?'], Zhongguo Qingnian Bao [China Youth Daily], (7 January 2004).
25. Li Bo, Zhongguo Difang Caizheng Fazhan Yanjiu Baogao-Fangdichan Shui yue Difang Caizheng Jianshe Yanjiu [2006 Report on China's Local Finance-Research on Real Estate Taxes and Local Finance] (Beijing: China Financial and Economic Publishing House, 2007).
26. James Scott, Comparative Political Corruption (Englewood Cliffs, NJ: Prentice Hall, 1972).
27. Andrei Shleifer and Robert W. Vishny, 'Corruption', Quarterly Journal of Economics no. 108, (1993), pp. 599-617.
28. Zhan, 'Undermining state capacity'.
29. Shaoguang Wang, 'For national unity: the political logic of fiscal transfer in China', in Leong H. Liew and Shaoguang Wang, eds, Nationalism, Democracy and National Integration in China (London: Taylor & Francis, 2004), pp. 221-246.
30. I thank Liu Mingxing for his generous sharing of the dataset. As the earliest available data on land supply are in 1998, the years before 1998 are treated as missing values.
31. The number of state employees (bianzhi) a local government can hire is administratively determined by the personnel department. It is unlikely to be influenced by the extra-budgetary funds that local government departments and agencies can raise. Thus this measurement can avoid the endogeneity problem between the dependent variable and this independent variable.
32. Starting in 1999, this category was lumped into the first category (caizheng yusuan bokuan) as documented in Difang Caizheng Tongji Ziliao (Local Fiscal Statistics).
33. Each directive jointly issued by the CCP Central Committee and the State Council is weighted by five points; each directive issued by the State Council only is weighted by three points; and all other directives issued by central ministries are weighted by one point.
34. While most directives are effective nationwide, some were applied to selected regions only. As a most notable example, the rural 'tax-for-fee' reform was first trialed in Anhui in 2000 and Anhui and Jiangsu in 2001, and in 2002 it was expanded to 20 provinces including Anhui, Jiangsu, Hebei, Inner Mongolia, Jilin, Heilongjiang, Jiangxi, Shandong, Henan, Hubei, Hunan, Chongqing, Sichuan, Guizhou, Shaanxi, Gansu, Qianghai, Ningxia, Zhejiang, and Shanghai.
35. Zhu Shouyin, Zhang Haiyang and Yan Hui, 'Nongcun shuifei gaige shidian he xiangcun guanli tizhi gaige genzong yanjiu baogao' ['Follow-up report on pilot reform of rural taxes and fees and village governance reform'], Jingji Yanjiu Cankao [Review of Economic Research], (2003). Hence the directives regarding this reform are counted as only applicable to the selected provinces.
36. The dataset spans from 1994 to 2006, fully or partially covering the Fourteenth, Fifteenth, and Sixteenth CCP Central Committees. There are both full members and alternate members of the Central Committee. As the full members are supposedly more influential than alternate members, the former is weighted by two points and the latter weighted by one point. Because of the frequent relocation of provincial officials, many Central Committee members do not work in a province for one full year. in the calculation, I assign points to a province only if a Central Committee member worked in the province in a given year for no less than five months, or if he/she was the only Central Committee member that worked in the province in that year.
37. Gang Guo, 'Vertical imbalance and local fiscal discipline in China', Journal of East Asian Studies 8(1), (2008), pp. 61-88.
38. Garrett Hardin, 'The tragedy of the commons', Science 162(3859), (1968), pp. 1243-1248.
39. for a detailed study of real central intervention, see Jing Vivian Zhan, 'Explaining central intervention in local extra-budgetary practices in China', Asian Survey 51(3), (2011), pp. 497-519.
40. Author's interviews in Jiangxi Province, 2011.