Central-Subnational Fiscal Relation and Constitutional Safeguard of Subnational Fiscal Autonomy: A Comparative Study on Unfunded Mandates and Intergovernmental Grants in China and the US

Abstract

Since China’s Tax-Sharing System Reform in 1994, the so-called “Chinese-Style Fiscal Federalism” has been formed, and the issues of conditional grants and unfunded mandates have become essential elements in China’s central-subnational governments’ relation. The defects of legislations in this area have led to tremendous chaotic phenomena. Recent budgetary and fiscal reforms have struggled to redistribute the spending burden between the central and subnational governments, thus to some extent strengthening subnational governments’ fiscal autonomy.As the US also bears a fiscal federalism structure, how it deals with federal-state fiscal relation and safeguards subnational fiscal autonomy through its constitutional regime is inspiring to China. Since different constitutional contexts lead to different central-subnational fiscal relation, this article first examines the constitutional framework of US and China’s central-subnational relation, and then reviews their historic trajectories of fiscal centralization and decentralization. Next, it compares constitutional and legal methods for preserving the subnational fiscal autonomy in the US and China from two specific aspects, the unfunded mandate and intergovernmental grant system. Finally, this article draws some conclusions of their concurrence and differences, and considers what China may (or may not) draw on from American experience.