The Chinese government is to clarify the delineation of fiscal power between central and local governments to ensure efficient delivery of public services.
A State Council guideline moderately increases the administrative obligations of the central government while reducing overlapping responsibilities between central and local governments.
Spending will be more logically distributed depending on the nature of the public service and improve the balance of accountability between central and local governments.
Since reform and opening-up began, the government has moved away from a highly centralized fiscal management system, introducing a tax sharing scheme in 1994.
While those efforts have contributed to growth, decentralization is now marked by vague areas of responsibility between various levels of government, leading to increased regional disparities, spawning problems like piling local government debt and inefficient delivery of public services.
The new guideline will go a long way to straightening out fiscal relations between central and local governments.
By 2020, appropriate fiscal relations will have been established in all ministries and departments, and enshrined in law.
