Hostname: page-component-586b7cd67f-2brh9 Total loading time: 0 Render date: 2024-11-28T17:17:03.778Z Has data issue: false hasContentIssue false
  • English
  • Français

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

Published online by Cambridge University Press:  12 February 2009

Pak K. Lee
Get access Rights & Permissions [Opens in a new window]

Extract

The Third Plenum of the 14th Central Committee of the Chinese Communist Party (CCP) in November 1993 decided in principle for a comprehensive reform of central-provincial fiscal relations. Soon after the Plenum, the central government announced that the new fiscal system, known as the tax-assignment system (fenshuizhi), would be implemented nation-wide in 1994. With the aim of providing adequate revenues for government, particularly the central government, by revamping central-provincial revenue-sharing arrangements, the reform is to “[change] the current fiscal contractual responsibility system of local authorities to a tax assignment system …” and to “gradually increase the percentage of fiscal income in the gross national product (GNP) and rationally determine the proportion between central and local fiscal income.”

Type
Research Notes
Information
The China Quarterly , Volume 164 , December 2000 , pp. 1007 - 1024
Copyright
Copyright © The China Quarterly 2000

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

1. See the “Decision of the CPC Central Committee on some issues concerning the establishment of a socialist market economic structure,” Beijing Review, 22–2811 1993, p. 20.Google Scholar

2. Shaoguang, Wang and An'gang, Hu, Jiaqiang zhongyang zhengfu zai shichang jingji zhuan xing zhong de zhudao zuoyong – guanyu Zhongguo guojia nengli de yanjiu baogao (To Strengthen the Leading Role of the Central Government in the Transition to a Market Economy: A Research Report on China's State Capacity), 1993Google Scholar, mimeo. See also Shaoguang, Wang, Fenquan de dixian (The Lower Limit of Decentralization) (Beijing: Zhongguo jihua chubanshe, 1997), ch. 1.Google Scholar

3. Almond, Gabriel A. and Powell, G. Bingham Jr., Comparative Politics: A Developmental Approach (Boston: Little, Brown and Co., 1966)Google Scholar, ch. 7; A.F.K. Organski and Kugler, Jacek, The War Ledger (Chicago: Chicago University Press, 1980).Google Scholar

4. Jackman, Robert W., Power without Force: The Political Capacity of Nation-States (Ann Arbor: University of Michigan Press, 1993).CrossRefGoogle Scholar

5. Beetham, David, The Legitimation of Power (Atlantic Highlands, NJ: Humanities Press International, 1991), Part 1.CrossRefGoogle Scholar

6. Snider, Lewis W., Growth, Debt, and Politics: Economic Adjustment and the Political Performance of Developing Countries (Boulder, CO: Westview Press, 1996).Google Scholar

7. Brunetti, Aymo and Weder, Beatrice, “Political credibility and economic growth in less developed countries,” Constitutional Political Economy, Vol. 5, No. 1 (Winter 1994), pp. 23–43CrossRefGoogle Scholar; Borner, Silvio, Brunetti, Aymo and Weder, Beatrice, Political Credibility and Economic Development (Basingstoke: Macmillan Press, 1995).CrossRefGoogle Scholar

8. Holsti, Kalvei J., The State, War, and the State of War (Cambridge: Cambridge University Press, 1996), p. 92.CrossRefGoogle Scholar

9. Shirk, Susan, The Political Logic of Economic Reform in China (Berkeley: University of California Press, 1993)Google Scholar, ch. 9. An'gang, Hu, “Background to writing the report on state capacity,” The Chinese Economy, Vol. 31. No. 4 (07–08 1998), pp. 4–29.CrossRefGoogle Scholar

10. The problems of the post-Mao fiscal reforms have been superbly discussed by Chung, Jae Ho, “Beijing confronting the provinces: the 1994 tax-sharing reform and its implications for central-provincial relations in China,” China Information, Vol. 9, Nos. 2/3 (Winter 1994–1995), pp. 7–13.Google Scholar For a Chinese source, see Kang, Jia and Kun, Yan, Zhuangui zhong de caizheng zhidu biange (The Institutional Reform of Public Finance in a Transition Economy) (Shanghai: Shanghai yuandong chubanshe, 1999), pp. 63–70.Google Scholar

11. “Opinion,” China Economic News, 29 10 1990, p. 1.Google Scholar

12. In September 1990 when Premier Li Peng spoke on the dangers of excessive decentralization, Ye Xuanping, the then governor of Guangdong province, openly challenged the Premier's assertion. See Baum, Richard, “The paralysis of power: Chinese politics since Tiananmen,” in Joseph, William A. (ed.), China Briefing, 1991 (Boulder, CO: Westview Press, 1992), p. 26Google Scholar; Zhijun, Ling, Chen fu: Zhongguo jingji gaige beiwanglu (1989–1997) (Sink or Swim: A Memorandum of China's Economic Reforms, 1989–1997) (Shanghai: Dongfang chuban zhongxin, 1998), p. 122n.Google Scholar Deng Xiaoping also reportedly rejected a draft blueprint of the Eighth Five-Year Plan for emphasizing central control over the economy rather than commitment to continuing economic reforms. Jing bao (The Mirror) (Hong Kong), 11 1990, p. 41Google Scholar; “Deng rejects draft of Five Year Plan,” South China Morning Post, 9 10 1990.Google Scholar

13. China News Analysis (Taipei), No. 1508, 15 04 1994, p. 5Google Scholar; Renmin ribao, 14 06 1993, pp. 1–2Google Scholar; Ho, Lok Sang, “Central-provincial fiscal relations,” in Cheng, Joseph Yu-shek and Brosseau, Maurice (eds.), China Review 1993 (Hong Kong: Chinese University Press, 1993), p. 12.9.Google Scholar

14. Ming bao, 12 03 1993, p. 7Google Scholar, in Foreign Broadcast Information Service, Daily Report - China (FBIS-CHI), 15 03 1993, pp. 9–10.Google Scholar

15. Compared with the same period in 1992, gross industrial output value and fixed investment in the first half of 1993 rose by 25.1% and 61% respectively (Xinhua News Agency, 19 07 1993Google Scholar, in FBIS-CHI, 19 07 1993, p. 24).Google Scholar

16. Senior officials in the capital were said to harbour worries about whether an overheated economy would spark inflation; local officials were rather enthusiastic about making investments; and economists argued that some signs of overheating notwithstanding, overall economic conditions were basically sound. A commentator's article in the Jingji ribao (Economic Daily) in 01 1993Google Scholar pointed out that no local government admitted that it had to cool down the overheated economy, but the article warned of the danger of imposing uniformity on the localities. Jingji ribao, 17 01 1993, p. 1.Google Scholar

17. Renmin ribao, 18 03 1993, p. 2Google Scholar; Zhijun, Ling, Sink or Swim, p. 307.Google Scholar

18. Wenhui bao, 8 11 1993, p. 2Google Scholar, in FBIS-CHI, 8 11 1993, pp. 39–40Google Scholar; Zhijun, Ling, Sink or Swim, p. 318.Google Scholar

19. Zijing (Bauhinia) (Hong Kong), 06 1993, pp. 6–9.Google Scholar Later, in November 1993, the central authorities, in invoking the authority of Deng Xiaoping to justify the macroeconomic regulation, argued that while Deng advocated the necessity of grasping opportunities to accelerate development, Deng warned at the same time that it was necessary to be prudent and prevent losses, especially major losses. The commentator's article, Renmin ribao, 9 11 1993, p. 1.Google Scholar

20. An'gang, Hu, “Background to writing the report on state capacity.”Google Scholar

21. Renmin ribao, 1 07 1993, p. 1.Google Scholar

22. “More teams to help push uniformity,” South China Morning Post, 20 07 1993Google Scholar; “Deng Xiaoping huijian difang zhengyao de neili qiankun” (The real purposes of Deng Xiaoping's meeting with local politicians”), Xinbao caijing xinwen, 20 08 1993.Google Scholar

23. Xinhua News Agency, 26 08 1993Google Scholar, in FBIS-CHI, 27 08 1993, pp. 34–35.Google Scholar See also Renmin ribao (haiwai ban), 14 09 1993, p. 1.Google Scholar

24. Hu An'gang said that the joint report was accepted by the central authorities when they devised financial and taxation policies to strengthen macroeconomic regulation (Xinhua News Agency, 25 July 1993, in FBIS-CHI, 27 07 1993, pp. 33–34).Google Scholar

25. An'gang, Hu, “Background to writing the report on state capacity.”Google Scholar

26. An'gang, Hu, “Fenquan shi you dixian de – qian Nansilafu fenlie de jiaoxun yu qishi” (“There is a bottom line of decentralization: the lessons and inspiration from the break-up of the former Yugoslavia”), Gaige (Reform), No. 2, 1996, pp. 123–26Google Scholar; Shaoguang, Wang, “Fenquan de dixian” (“The bottom line of decentralization), Zhanlue yu guanli (Strategy and Management), No. 2, 1995, pp. 37–56.Google Scholar

27. Senior officials of the Ministry of Finance told Wang and Hu in their meeting in June 1993. An'gang, Hu, “Background to writing the report on state capacity.”Google Scholar

28. South China Morning Post, 19 01 1994Google Scholar, cited in Chung, Jae Ho, “Beijing confronting the provinces,” p. 16Google Scholar; Asian Wall Street Journal, 10–11 12 1993, p. 1.Google Scholar

29. ‘Tighter control of cash order,” South China Morning Post, 4 12 1993Google Scholar; “‘Warlords’ warned on tax reform,” ibid., 6 December 1993; “Strange case of the missing economic czar,” ibid., 8 December 1993; Zhongguo tongxun she (Hong Kong), 18 January 1994, in FBIS-CHI, 27 01 1994, pp. 54–55.Google Scholar

30. Jisheng, Yang, Deng Xiaoping shidai 1976–1997 (The Era of Deng Xiaoping 1976–1997) (Hong Kong: Sanlian shudian, 1999), p. 408.Google Scholar

31. Xianggang shangbao (Hong Kong Commercial Daily), 21 09 1993, p. 2Google Scholar, in FBIS-CHI, 23 09 1993, pp. 43–44Google Scholar; Xianggang shangbao, 23 09 1993, p. 8Google Scholar, in FBIS-CHI, 24 09 1993, pp. 36–37Google Scholar; South China Morning Post, 24 09 1993, p. 11Google Scholar, in FBIS-CHI, 24 09 1993, p. 37Google Scholar; Hong Kong Standard, 5 10 1993, pp. 1, 7Google Scholar, in FBIS-CHI, 5 10 1993, p. 22.Google Scholar

32. South China Morning Post, 23 11 1993, p. 1Google Scholar, in FBIS-CHI, 23 11 1993, p. 46Google Scholar; Wenhui bao, 29 11 1993, p. 2Google Scholar, in FBIS-CHI, 30 11 1993, pp. 22–23.Google Scholar

33. Li, Linda Chelan, Centre and Provinces: China 1978–1993: Power as Non-Zero-Sum (Oxford: Clarendon Press, 1998), p. 228Google Scholar; South China Morning Post, Business Post section, 8 November 1993, p. 2, in FBIS-CHI, 9 11 1993, pp. 32–33.Google Scholar

34. Wang, Shaoguang, “China's 1994 fiscal reform: an initial assessment,” Asian Survey, Vol. 37, No. 9 (09 1997), p. 804.CrossRefGoogle Scholar

35. Li, , Centre and Provinces, p. 160.Google Scholar

36. Ma, Jun, “The reform of intergovernmental fiscal relations in China,” Asian Economic Journal, Vol. 8, No. 1 (03 1995), n. 34Google Scholar; Zhongguo caizheng nianjian (China's Fiscal Yearbook), 1995, p. 62.Google Scholar

37. Wang, Shaoguang, “China's 1994 fiscal reform,” p. 804.Google Scholar

38. Renmin ribao, 23 11 1993, p. 2.Google Scholar

39. Wenhui bao, 26 11 1993, p. 2Google Scholar, in FBIS-CHI, 29 11 1993, pp. 36–37Google Scholar; Xinhua News Agency, 5 December 1993, in FBIS-CHI, 7 12 1993, p. 25Google Scholar; Renmin ribao, 6 12 1993, p. 1.Google Scholar

40. Kang, Jia and Kun, Yan, The Institutional Reform of Public Finance in a Transition Economy, p. 157.Google Scholar

41. Author's interview in Xi'an, , Shaanxi, 11 1997.Google Scholar

42. Ming bao, 14 11 1993, p. B2Google Scholar, in FBIS-CHI, 17 11 1993, pp. 39–40Google Scholar; Wang, Shaoguang, “The institutional roots of central-local rivalry: China, 1980–1996,” in Lin, Chong-Pin (ed.), PRC Tomorrow: Development under the Ninth Five-Year Plan (Kaohsiung: Graduate Institute of Political Science, National Sun Yat-sen University, 1996), p. 31Google Scholar; Li, , Centre and Provinces, p. 161.Google Scholar

43. It is understandable that the central government provides ethnic minority regions with huge fiscal subsidies so as to stimulate economic growth and consequently undermine the influence of centrifugal political forces there.

44. Gang, Fang, “Lun gonggong shouzhi de xin guifan” (“On the new norms of public revenues and expenditures”), Jingji yanjiu, No. 6 (1995), pp. 34–43Google Scholar; Wong, Christine P.W., “Fiscal dualism in China: gradualist reform and the growth of off-budget finance,” in Brean, Donald J.S. (ed.), Taxation in Modern China (New York & London: Routledge, 1998), pp. 187–208.Google Scholar

45. China's Fiscal Yearbook, 1992, pp. 251–53Google Scholar; 1993, pp. 149–151; 1994, pp. 149–151; 1995, pp. 126–28; 1996, pp. 130–32; 1997, pp. 192–96; 1998, pp. 125–28.

46. “Special force to chase tax dodgers,” South China Morning Post, 13 03 1999, p. 8Google Scholar; “Guowuyuan chouzu shuiwu jingcha” (“The State Council is planning to set up taxation police”), Ming bao (Internet edition), 30 07 1999.Google Scholar

47. Lifeng, Li, “Dui woguo fenshuizhi de fenxi yu fansi” (“The analysis and introspection of China's tax-assignment system”), Jingji wenti (Economic Problems), No. 12 (1996), pp. 56–59Google Scholar; Weihua, Yang, “Zhongguo fenshuizhi yunxing de chengxiao wenti yu duice” (“The problems of implementation of the Chinese tax-assignment system and the ways to deal with them”), Zhongshan daxue xuebao (shehui kexue ban) (Journal of Sun Yat-sen University, Social Science edition), No. 5 (1996), pp. 10–17.Google Scholar

48. Renmin ribao, 14 12 1982, p. 3Google Scholar and 25 October 1983, p. 1; Shukun, Cui and Bokun, Zhao, “Tan tan 1983 nian caizheng guanli tizhi” (“A discussion of the 1983 fiscal management system”), Caizheng (Finance), No. 7 (1983), pp. 37–38Google Scholar; Li, , Centre and Provinces, p. 212Google Scholar; Bahl, Roy, Fiscal Policy in China: Taxation and Intergovernmental Fiscal Relations (South San Francisco: The 1990 Institute, 1999), p. 23.Google Scholar

49. Huang, Yasheng, Inflation and Investment Controls in China: The Political Economy of Central-Local Relations During the Reform Era (Cambridge: Cambridge University Press, 1996), pp. 53–55Google Scholar; Wong, Christine P.W., Heady, Christopher and Woo, Wing T., Fiscal Management and Economic Reform in the People's Republic of China (Hong Kong: Oxford University Press, 1995), p. 94.Google Scholar

50. Before intergovernmental transfers, the central share was only 14.7% in 1971–75; it rose to 34.9% in 1981–85 and 33.4% in 1986–90. The budgetary revenue is not adjusted. China's Fiscal Yearbook, 1999, p. 467.Google Scholar

51. Ibid. p. 468. Information on the central and local shares of fiscal subsidies before 1992 is not available, so fiscal data based on the Chinese definition are used.