Research On Local Public Expenditure Structure And Its Optimization In China From A Perspective Of Public Finance

China government decided to establish the public finance system which is compatible to market economy in 1998. Some progress has been made in last 10 years. People attached most importance on the optimization of local public expenditure structure which is an important part of the establishment of public finance. Based on public finance theory a positive analysis of local public expenditure structure in China will be made to find its tendency and deficiency. Some proposals will be put forward about the optimization of local public expenditure structure in China according to the analysis of its influential factors.The first part is literature review. First, the research on public finance function and fiscal decentralization suggests that the local public expenditure should base on the government function. In a fiscal decentralization system the local public expenditure structure should be adjusted to the function that a local government should undertake. Second, the main points of public expenditure structure will be summarized based on a review of the evolution of public finance theory in China. According to the analysis of relative researches the objective of optimization of local public expenditure structure can be represented. The public expenditure of resource allocation should focus on providing local public goods. The public expenditure of income redistribution should focus on the fairness of staring point which can be improved by more public expenditure on employment. The local public expenditure should implement the macroeconomic policies and improve local economy development in a scientific way.In the second part a comparative study on local public expenditure structure of representative federalism state and unitary state is made to find some experience. The conclusion is that the local public expenditure structure in these countries is based on a clarified definition of management rights, although the diversification exists because of the degree of decentralization and some historical and politic factors. The local public expenditure structure in these countries is adjusted in accordance with the economic and social condition.The third part is an analysis of local public expenditure structure in China after the establishment of public finance system. It reveals that the most significant tendency is the decline of economic expenditure and the increase of social security expenditure which meet the changing public needs. However, some differences can be found when the local public expenditure structure is studied in different provinces and different levels, showing the imbalance of establishment of public finance system in China.The main problem of local public expenditure structure is analyzed in the fourth part. First, the local government undertakes more social security expenditure which is the obligation of central government. Higher proportion of local social security expenditure not only weakens the function of income redistribution but also increase the finance pressure on local government which impedes the optimization of local public expenditure structure. Second, the public expenditure on education and public health is insufficient and has an unreasonable structure. Third, the proportion of administration expenditure is unreasonable and the economic expenditure does not meet the request of scientific development. At last the study suggests that the expenditure on basic public service is not equal in different areas and the expenditure effect on economic increase is not good.In the fifth part the influence factors of expenditure structure is analyzed. First, an econometrics research reveals the correlation between local public expenditure structure and some important variables with the cross-section and period effect. Second, fiscal regime factor greatly influences the local public expenditure structure. The expenditure structure of some provinces is in the control of the central government because they don't have enough financial revenue and have to depend on the transfer payment from central government. Fiscal regime reforms below province level also greatly changed the local public expenditure structure. Some kinds of expenditure fluctuate with the macroeconomic policies. When the expansion fiscal policy is implemented the economic expenditure was increased greatly to enlarge inner demand and the administration expenditure and social security expenditure also were affected.In the sixth part based on the positive analysis some policy suggestions are put forward from a perspective of public finance theory. Local public expenditure structure should be adjusted to meet the local public needs, complying with the principles of people-oriented and overall considerations. The education expenditure should be increased with an optimization of its structure. Public health expenditure should benefit more people to meet the demand of basic public health service. Reform of other public welfare institutions should be depended. To optimize the administration expenditure the government function should be adjusted so that the administration efficiency can be improved and the administration cost can be lowered. The social security expenditure should play a more important role in increasing employment and the social security system of administration and public welfare institutions should be reformed. The main measures of optimizing the economic expenditure are increasing the input on infrastructure of public welfare cause, increasing the support of agriculture and improving the industry development in a more efficient way. Second, the expenditure responsibility distribution between central government and local government should be reasonable. Central government should take more responsibility of basic social security expenditure and higher education expenditure. The transfer payment from central government should be perfected and the adjustment of public expenditure structure below province levels should be sped up. Third, the optimization of local public expenditure structure should be carried out in a scientific and legal way. The establishment of legal system establishment should be strengthened to define the management rights of government at all levels and normalize the transfer payment. Reform of department budget should be accelerated and the supervision on public expenditure structure by local people congress should be reinforced. Institutional innovation is the way to release the local fiscal pressure. Non-governmental fund can be attracted in some infrastructure construction and an effective measure of creditor financing should be explored in local government.