| From 1998 on, the Chinese government set out to carry out the Active Fiscal Police to activate the economy, which was the first time for the government to do this with the help of the governmental (public) expenditure. Then the Great Explore of the Western started and the governmental investment took an important role, so the issue of the governmental expenditure is more noticeable than before. Any economic actions must aim at the efficiency, besides the public investments. Although there are some documents on the public investments, how about the extent of the efficiency to the public investments is still a "black box"to most people. This situation is abnormal for a modern democratic country, and the mistaken decisions are also usually inevitable, so we must know weather the public investments are efficient and how about the extent. Standing on this point, I decided to make the research on the efficiency of the Governmental Capital Expenditure (EGCE). In this thesis, I want to study some major issues, such as how about the EGCE, what influence the EGCE at the most extent, how to improve the EGCE and so on to call the public attention to the EGCE. Furthermore, the purpose of this thesis is to solve the following problems: what is the EGCE and how to define it? What are the elements to the EGCE? How about and how to evaluate the EGCE of China? What are the decisive factors to influence the EGCE of China? How to improve the EGCE of China to further the progress of the system of the market economy? In this thesis, I have got some important viewpoints and conclusions as such: The administrative units and institutions tend to hide some true information in the drawing the public budget, they can get some positive profit from this. Thus, the situation of asymmetric information is usually more profitable to the applying units (including the administrative units and institutions) than to the fiscal administrations. There exist spaces in the public choice of the governmental capital expenditure of China, the spaces can avoid the lose of the efficiency of the governmental capital expenditure, but at the same time, they can also bring about the lose. Among the fiscal functions, it is originally assured that the central government mainly takes the functions of redistribution to the income and of making the economy growing smoothly, the local governments mainly take the function of resource distribution. In fact, the local governments can also take the functions of redistribution to the income and of making the economy growing smoothly under some situations. The policy-making power of the Current Expenditure must be centralized properly, but the power of the Capital Expenditure must be decentralized properly. .The maximizing--output motivation of the local governments usually causes the closing to each other within districts and lows the efficiency of the capital expenditure. Therefore, if the central government want to get a higher efficiency of the capital expenditure of the local governments, it must give up the checking systems based on the maximizing—output to local governments. .The dual--shortage of consumer sovereignty and producer sovereignty in China is the main inducement to the low efficiency of the governmental capital expenditure. This thesis consists of eight chapters in four parts. Part one (from Chapter one to Chapter three) mainly deals with the theoretical analysis of the EGCE; Part two (Chapter four) mainly deals with the evaluation to the EGCE of China; Part three (from Chapter five to Chapter seven) mainly studies the inducements and the mechanism of the low EGCE in China; the last Part, Part four (Chapter eight) mainly deals with the suggestions on how to improve the EGCE in China. Chapter one is the introduction. This part introduces the purpose of the thesis, the mainly problems to deal with, the analytical method using in the thesis, the main content of the thesis, etc. The theme of the thesis is the efficiency of the governmental capital expenditure, the background is the active fiscal policy. As we know, with the help of the expanding expenditure, the active fiscal policy aims at expand the gross demand. But this purpose depends on a high efficiency of the public expenditure, especially of the capital expenditure. Still today, as I know, no one has yet studied these problems, such as how about the efficiency of the governmental capital expenditure, what are the main factors to cause the low efficiency, how to maintain the high efficiency. All these problems are very important to get the purpose of the active fiscal policy. The main problems dealing in this thesis has been introduced above. The analytical method in the thesis mainly is the positive analysis, because the thesis emphasizes on the practice of the capital expenditure of the government. Of course,the standard analysis will be used when it is necessary. Chapter two mainly deals with the relative category of the GCE and the practice in China. The GCE is the public Expenditure of the governments to maintain or buy durable fixed productive factors. At the same time, the GCE can be understood as the process of the expenditure. The feature of the GCE can be defined to three: the assets of it can adopt many methods in the price-fixing; the process of the choice is a collective public choice; the expenditure aims at profitable and non-profitable. The effect of the capital expenditure to the economy is dual: crowding-out effect and crowding–in effect, but the two effects can not take place at the same time, that is to say, whatever takes place depends on the situation of the economy. The subjects and the quantity of the practical capital expenditure of the government are larger than the public budget's. But in the thesis, the study mainly deals with the capital expenditure in the public budget. Chapter three deals with the theoretical analysis on the EGCE. The optimal efficiency situation of the market economy is the Pareto Efficiency. A given economic arrangement is the Pareto Efficiency if there can be no rearrangement that will leave someone better off without worsening the position of others. The Pareto Efficiency of the market economy has three conditions: the balance of the market for the consumer goods; the balance of the market for the productive factor; the balance of the market for the consumer goods and market for the productive factor. The optimal situation of the GCE also is the Pareto Efficiency, but the condition of which is that the total price paid by the consumers who are willing to consume a unit of the marginal public goods amounts to the total cost of the marginal public goods. So the implication of the EGCE is that the preference and needs of the consumers to the public goods are totally met through the GCE, at the same time, the cost of the public goods is minimized. If there two are realized, we could say the EGCE is Pareto Efficiency. According to this, the EGCE mainly consists of three efficient situations: the distribution efficiency, the X efficiency and the scale efficiency.The implication of the distribution efficiency is that the preferences of the consumers to the public goods are totally met through the GCE. And the implication of the X efficiency is that the cost of the public goods is minimized. The key to the distribution efficiency is that the consumers'preferences are all concerned by the policymakers, who take part in the public choice and decide how to arrange the GCE. If the policymakers don't concern the consumers'preferences but their own preferences or just according to their subjective supposing during the public choice, the EGCE would absolutely be very low. So the key problem to realize the distribution efficiency is to make the policymakers concern the consumers'preference when they are deciding the arrangement of the GCE. The realization of the X efficiency is in the process of the expense. In this process, if the principle of minimizing cost were complied with, the GCE would be in conformity with the principle of the X efficiency. So the key problem to realize the X efficiency is to make the executive organs of the GCE comply with the principle of the minimizing cost. The scale efficiency of the capital expenditure means that the cost of the public goods is just amount to the total taxes paid by the consumers, who believe that the price they paid is just amount to the cost they must afford of the public good. The implication of the scale efficiency of the capital expenditure is that it is help to coordinate the relationship of the market and the government, then it is help to coordinate the relationship of the current expenditure and the capital expenditure. Finally, it is sustainable by the income. Chapter four is the part of the evaluation of the EGCE of China. Ahead of the evaluation, it is necessary to study the tendency of the public expenditure in China from the Reforming and Opening. From the timely comparison, the tendency of the public expenditure accords with the Wager's Law, that is to say, the scale, especially the quantity of the public expenditure has been growing continually, that proves that we have followed the steps of the European and Americans. In addition, the change in the public expenditure's construction shows the precocity wealth public finance of China, it means that the Current Expenditure is growing faster than the Capital Expenditure. The evaluation to the distribution efficiency in China mainly relates to the public investments in agriculture, education, infrastructure, public facilities and environmental protection, the main subjects that the capital expenditure should investin the market economic system. Although the evaluation focuses on some main points, these main points can summarize the whole areas that the capital expenditure should invest. According to the evaluation, we can get two conclusions: the investments are all short in these areas; the investments to the internal structure within in every area are out of proportion. But weather it is proportional within the areas? The analysis shows that it is also out of proportion. So the distribution efficiency is low. The evaluation appears that the capital expenditure is short, How to explain it? It can be attributed to the discordant growth between the current expenditure and the capital expenditure as well as the high cost. The latter is related to the X low efficiency. The X low efficiency consists of three models, the monetary--cost X low efficiency, and the timely--cost X low efficiency and the low--quality X low efficiency. These three models exist widespread according to the evaluation, some even turns worse. Therefore, we can conclude that the EGCE belongs to X low efficient. The X low efficiency in the GCE may belongs to two causes. Firstly, the public sector is the only investor in the public areas, and there is no competition, so the motivation to monitor and manage the investment is very weak. Secondly, the institutions as risk constraints, system of legal person responsibility to projects and the system of the governmental purchase which are very important to the efficient capital expenditure are very absent. Now we can study the scale efficiency of the GCE. We have got the conclusion that the scale of the capital expenditure is small, so the distribution efficiency is low. Through the linear regression analysis, it appears that the capital expenditure is more relational to the deficit of the public finance than the current expenditure, which means that the capital expenditure causes the deficit more directly. So we cannot say that the scale is efficient. But according to the positive analysis, the scale of the capital expenditure recently has not caused the crowding—out effect, and it seems that it has caused the crowding—in effect, which means that the scale is beneficial to the economy. How to explain the contradict conclusion? As we know that the scale of the capital expenditure is small to the function fulfilling of the government, because the current expenditure always crowd out the capital expenditure and the public income is still growing slowly. In this situation, we cannot consider the scale of the capital expenditure is efficient.Chapter five analyses the effect of defects for the budget administration on the EGCE. The analysis in this chapter follows the links of the budget administration, such as the drawing, the checking, implementing, auditing and final accounting stage. During the drawing, the time is too short and the subject demonstration is not complete; the old methods taken in the drawing cannot change with the market, so the draft is not very rational. The serious problem in this stage is that the public budget is divided into two parts: the budgetary and the extra-budgetary, which mean that the budget is not complete, either. During the stage of the checking, for the draft is too rough and the check is too hurry, the consumers'preference cannot be ensured in the final draft. In the carrying, there is no budget constraint to the administration organs, so the low distribution efficiency and X low efficiency take place frequently. In the final accounting, the auditing doesn't play its role; many problems cannot be disclosed in the stage. Therefore, it is not surprise that the whole efficiency of the GCE is low. The most serious problem in the budget administration is the asymmetric information between the fiscal organs and the executive organs. The model prove that it is more profitable to the latter, usually they can get positive profit (which increase the cost of the items directly) if they hid some important information, which undoubtedly stimulate the motivation of the executive organs to make the asymmetric information situation. This situation takes place throughout the budget administration. The study on the public choice of the GCE is in the chapter six. The chief issue in the public choice is to form the collective preference. But Arrow's impossibility theorem tells us that such preference doesn't exit, the public choicer's own preference thus substitutes for the collective preference. The preference determines the public choice comes from many ways, such as kinds of long-term programs, many industry policy outlines, etc, which means that the consumer sovereignty and then the distribution efficiency are in the stake. The role of the public choicer is dual, the statesman (represent the organ of power) and the administrative officials (represent the organ of administration), which will affect the impartiality and the justice of the public choice. The choice model in China is very particular as the CCP take part in the choice; even so it is not able to avoid the bureaucrat autonomous actions. The negotiations in the public choice don't make the best of the system of the market economy and get rid of the defects of theplanned economy. In the negotiations, the producer sovereignty, which is scattered among the choicer, cannot be gathered to provide qualified public goods. Of course, it is not right to assume the distribution of all the public resources be decided by the public, the "spaces"lying in the public choice may be helpful to avoid the defects of the type of choice. But the personal decision everywhere is very harm to the efficiency of the GEC. Chapter seven concerns how the actions of the multi-government affect the efficiency of the GEC. The prevalent theory on the responsibility assigning assumes that the distribution duty should mainly be assigned to the local governments; in fact, this model is mainly referred to the capital expenditure but not the current expenditure. This means that the responsibility between the central and local government should be assigned completely, but actually it is impossible for the bounds between the national public goods (that should be provided by the central government) and the local public goods (that should be provided by the local government) is not clear. In this condition, both the central and the local government tend to play the game of shirking their own responsibility to the other. Each side's profit depends on the comparison of the shirked and adopted responsibilities. The outcome of this type of games is that the consumers'demand for national or local public goods cannot be met; this just is the low efficient of the GEC. Besides the games between the central and local government, the different level local governments also play game, and what's more, the local governments may compete each other for the public resources to enlarge the output in its jurisdiction. We know that the maxim output is the principle goal when the central government checks the local governmental performs, so by every kind of way, the local government usually can make their output maximized. Although the local governments always expand the scale of the GCE, the efficiency of the CE is not satisfied, for they usually invest in profitable areas, where the private investment can do better. In general, the central government should supervise the investment of the local governments, but the result is not satisfied. This can be attributed to the asymmetric information, the weak motivation for the central government to supervise the local governments, the losing force from the central government to the multi-levels government, etc.Chapter eight deals with the suggestions to improve the efficiency of the EGCE. First, we must be sure that there is a large space to improve the efficiency of the EGCE, for the technical factors to sustain the satisfied efficiency have not been used extensively. If they were used to lift the level of the efficiency, the outcome would be better, some cases have proved this. The major obstacle to the better efficiency comes from the institutions. Fortunately, the system of sharing-taxes has supplied a good institutional situation; the next step is to reform relational institutions. According to the above point of view, the institution reforming including the following: . Adjust the areas of the governmental investment. . Improve the administrational institution to the GCE. . Reform the institution of the budget administration. . Reshape the public choice system. . Make innovation to the fiscal systems. . Push the reform of the state-owned enterprises. . Establish a good ideological atmosphere for the legal financing.
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