| Since the beginning of the reform and opening in 1978, China’s economy has developed rapidly and public income and expenditure are growing even faster than the growth rate of economy, but, the goods or service provided by government for citizens has not increased simultaneously, where government revenue has been spent? The article is to find answer with this problem. We find government financing channel is the key to the problem. On the basis of literature reading, the article studies the legitimacy and effectiveness of government financing channel with normative analysis and empirical analysis.First, in studying the problem of choosing government financing channel, the article classifies goods or services provided by the government based on benefit-received principle, finds government financing channel should vary on the nature of goods or services. We find in multiple comparison that, when the government choosing to tax or charge for goods or service, the generalized preference goods should be financed by general tax, and the special preference goods should be financed by fee, otherwise, the government will provide goods or service with inefficiencies and inequalities. When the government choosing to tax or borrow, the generalized preference goods must benefit taxpayers of the present age and taxpayers of the future, and should be financed by tax and debt, the present and future generations all bear cost for their benefits; the special preference goods only benefits taxpayers of the present age should not be financed by debt, otherwise, it will raise profound question of intergenerational equity, and will lead to the lower efficient collocation of social resources, when the government debt has been accumulated to a certain extent, it is likely to trigger government debt crisis.Second, the article studies the problem of restricting government financing channel. In the model of Leviathan, the government is assumed to act as a monopolist that maximizes fiscal revenues, expected to reach out "grabbing hands", government financing channel is subject to be abused. However, the people will eventually against government financing power augmentation, they are the true actors of history, public action must be "interpreted" and "understood" through the behavior of individuals. Thus, "good govenance" must be based on the legitimacy and effectiveness of government financing channel, the necessary conditions of which is that the people can lay close hold upon government financing channel. The government is naturally inclined to expand government financing power, constantly increases government spending to meet his greedy desire, only the people can control government financing channel and ensure the government spending does not go unchecked, and only the constitutional provisions may hinder the Leviathan in its drive to appropriate social resources.On the basis of theoretical analysis, the article pays more attention to institutional constraints on the government financing channel in China, and makes an empirical analysis on "grabbing hands" of China’s local governments. We find that fiscal decentralization has heterogeneous effect on local government’s "grabbing hand". Local governments in China’s eastern regions rely mainly on their own revenues, more fiscal decentralization is able to prevent local government’s "grabbing hands"; Local governments in China’s middle and western regions rely mainly on transfer payments from central government, more fiscal decentralization is able to provoke local government’s "grabbing hands".Finally, the article gives some policy suggestion on restricting government financing channel, the article points out that government financing channel must be limited to connect government revenue and government spending, the key here is government financing channel should be "approved" by people. The article advocates for fiscal constitutionalism, public budget constraint and citizen participation to restrict government financing channel.
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