The Impact Of The "China’s Province-Managing-County (PMC)" Fiscal Reform On Local Environmental Governance

With the continuous acceleration of Industrialisation and urbanisation in China,environmental pollution in the county areas has become increasingly serious.According to China’s Second National Pollution Source Census Bulletin,water pollution emissions in county areas account for almost half of the water pollutant emissions in the survey sample.From the characteristics of environmental pollution in counties,compared to point source pollution in cities,mainly agricultural surface source pollution,pollution is more dispersed,hidden,more extensive and more difficult to monitor,coupled with the limited capacity of infrastructure construction for environmental management in counties,it is difficult to effectively resolve.Therefore,county environmental issues appear to be very important and urgent.Most scholars have given solutions on how to effectively resolve county environmental pollution problems in terms of Industrial structure,technological innovation and energy consumption(Tan Juan and Chen Xiao chun 2011,Lin Mei shun 2017,Yu Yong ze et al.2020).This paper attempts to find solutions from the perspective of the fiscal management system.As China’s decentralised system continues to develop and improve,more and more scholars have begun to explore the relationship between China’s decentralised system and local environmental governance.At present,academics have mainly discussed the impact of the local administrative system(environmental federalism)and the fiscal management system(fiscal decentralisation)on local environmental governance(Oates 2001,Ji et al2021,Wu and Cao 2021).In recent years,China has implemented the reform of the "China’s province-managing-county(PMC)",which provides a practical basis for the study of Chinese institutions and local environmental governance.Under China’s ’directly administered county’ fiscal system,county governments have more financial autonomy,which not only effectively improves the efficiency of public goods delivery and promotes Industrial restructuring,but also contributes to a significant improvement in the efficiency and capacity of environmental governance through the proximity of county governments to information sources.This paper analyses the impact mechanism and effects of the " China’s provincemanaging-county(PMC)" reform on local environmental governance,which is characterized by fiscal decentralization,using the "directly administered counties" reform implemented gradually in various provinces since 2004 as a policy experiment.In this paper,the weekly observation data of the river water quality stations of the General Environmental Testing Station of the Ministry of Ecology and Environment in 25 provinces(autonomous regions and municipalities directly under the central government)from 2008 to 2017 were selected as the explanatory variables,and the water quality pollution data were matched with the selected control data according to the exact matching method.We use a double difference method to empirically examine the impact of the fiscal ’directly administered county’ reform on local environmental governance and to identify the mechanisms of the impact of the fiscal ’directly administered county’ reform on local environmental governance.The paper uses parallel trend tests and placebo tests to examine the applicability of DID,and uses various methods such as PSM to confirm the robustness of these results.This paper provides a solution to the environmental governance of county economies and offers ideas for adjusting the ’directly administered county’ fiscal reform currently being implemented in China.The study found that the ’ China’s province-managing-county(PMC)’ reform had a positive effect on river water quality pollution,resulting in a reduction in the level of pollution in rivers and an increase in their self-purification capacity.The reasons for this phenomenon are: firstly,the ’directly administered counties’ reform has given county governments more initiative to allocate their revenues and expenditures appropriately.The proximity of local governments to information sources and their greater understanding of local residents’ preferences and familiarity with local pollution conditions has enabled local governments to target their environmental pollution management efforts.Secondly,the reform of the "China’s province-managing-county(PMC)" helps to reduce the number of financial levels,reduce the cost of transferring financial resources,improve the efficiency of the use of financial resources and revenue,and strengthen the determination of local governments to control the environment.Thirdly,under the decentralised system,the inclusion of environmental performance in the assessment of officials by the state has triggered competition among local governments,which has led to a greater focus on environmental quality in their jurisdictions,creating a good mechanism for "top-by-top competition".At the same time,the reform of the " China’s province-managing-county(PMC)" can lead to the upgrading of the Industrial structure of the reformed counties and the upgrading of new technologies,thus reducing the pollution level of the localities.At the same time,this paper also through further analysis found that the financial "China’s province-managing-county(PMC)" reform is more effective in the economic development of the better conditions of the region,will significantly reduce water pollution,in the economic development of the relatively poor conditions of the region but will increase water pollution.The reason for this is that the better the economic base,the more revenue the area will have,the more local public services will have stable financial security,and the more attention will be paid to local environmental management.On the contrary,in areas with relatively poor economic development conditions,local expenditure will be more biased towards economic infrastructure construction and neglect environmental management,as local governments are more concerned about performance.This paper also examines the effects of the ’expansion of power and strengthening of counties’ reform,which is very similar to the ’direct control of counties’ reform.Unlike the fiscal ’ China’s province-managing-county(PMC)’,which gives county governments more fiscal autonomy,the ’expansion of power and strengthening of counties’ policy focuses on giving administrative power to local governments.In our analysis,we tried to control for the effect of this factor by adding the environmental assessment variables of officials and the "expansion of power to counties" variables to the model,and found that environmental performance assessment could strengthen the effect of the fiscal "China’s provincemanaging-county(PMC)" on local environmental governance.After adding the variable of "expanding power and strengthening counties",it is found that the reform of "expanding power and strengthening counties" significantly aggravates local environmental pollution,but the reform of " China’s province-managing-county(PMC)" can still improve local environmental quality.We also control for the local environmental quality.In addition,we also controlled for stations located at provincial boundaries,and the results showed that water quality in non-provincial areas improved significantly.This shows that the environmental governance effect of the fiscal " China’s province-managing-county(PMC)" policy still exists even after controlling for the "expansion of power and strong county" reform,and that this positive effect of environmental governance is not transferred between counties.The findings of this paper support the conclusion that the "provincial control of counties" is a "top-by-top competition" in the environmental governance of counties.Based on the above analysis,this paper suggests that the central government should continue to support provinces to implement the reform of the " China’s province-managingcounty(PMC)" to ensure that localities have sufficient financial resources for pollution control.At the same time,it should accelerate the transformation of local economic development,improve the assessment system of local governments,and raise public awareness of environmental protection,so that the dividends of environmental protection policies can be shared by all.