Budgets and Government Revenues

Abstract

This paper provides a bibliography for China’s budgets and government revenues in chronological order. First, the author presents a brief introduction on China’s fiscal system before 1978. In the planned economy era, the government controlled the economy through the executive order. The tax system played a relatively less important role. The second topic is about the fiscal decentralization and government expenditures. During 1980–1993, the fiscal contracting system was implemented. Since 1994 the tax-sharing system has been adopted. Both these reforms are a process of fiscal decentralization. At the same time, the central government still has the tight control over the political system. The political-centralization-fiscal-decentralization system plays a key role in promoting economic growth. It also has important implications for public service, government size, and fiscal expenditure efficiency. The direct consequence of the 1994 tax-sharing system is that local governments have less revenue but still have to support most of the cost of public services, including the productive infrastructure investment. Then the local governments turned to the land finance model. This will be discussed as the third topic. The fourth topic is on local government debt. After the 2008 global financial crisis, to mitigate the impact of the crisis in the Chinese economy, the Chinese government introduced a 4 trillion RMB (renminbi) economic stimulus plan in 2009. Among the four trillion yuan—the yuan is the basic unit of the renminbi—the local government is responsible for raising three trillion. Even land finance itself could not afford it. The central government allows the local governments to lend funds through local government financing platforms after the Ministry of Finance and the People’s Bank of China makes policy changes. This action has an important effect on the local government debt and the stability of China’s financial system. The last topic is about the tax-for-fee reform for rural citizens. Finally, there is a brief discussion of some other topics that do not fall into these categories but are interesting enough to cover under the theme.