The Study On The Intergovernmental Fiscal Allocation And Coordinating Development Of Regional Economy

Since the reform and opening policy, the economy in China has been increasing consistently with the annual GDP boost of 9.5%, hence the instant accumulation of social wealth. Meanwhile, this fruit of reform is unevenly distributed among different regions. The economy in various areas has improved on the whole, while their paces are badly coordinated with the being enlarged disparities. The competing market has failed to realize the even development among those regions. Therefore, it is the place where Chinese government should intervene. The financial capability is the foundation, as well as the material support, among the many forces of the government in order to deal with the problem of regional differences in economic development. This thesis is meant to research on the ways of intergovernmental fiscal allocation to coordinate the economic development among different regions, with the analyses of several issues as follows: what is the role of government in regional economic development? What is the essence of intergovernmental fiscal allocation? What systems of intergovernmental fiscal allocation should be consulted and what is the relationship among the systems? What are their respective effects on regional economic development? How to activate the systems properly to allocate the budgets among regional governments and to promote the coordinated economic development collectively?Through the theories of regional economics, public finance, politics as well as the theories and methods of statistics and econometrics, some conclusions have been drawn as follows:1. Among the several elements of the system of government capabilities, financial ability is the prerequisite and economic basis to realize its other functions. Regions are the cells for the economic development of the society because all the strategies to boost the economy are applied in a certain scope of regions. Therefore the regions are the geological spaces for the governmental finance to function. The process of the national government's intervention in the economy by finance can also be understood as a process of the construction of a specific regional space. In this case, the situation of intergovernmental fiscal allocation determines the levels of interregional economic development, while the economic situations in the regions make the financial ability of the government. The two factors appear to be interacting and restricting each other.2. Division of the tax revenue is the basis of intergovernmental fiscal allocation. Through the analyses, the division among the regions is imbalanced, and their tax burdens go crosswise in the regions. These two phenomena changed the distribution of the governmental finance in the regions of the east, midst, west and the northeast, hence the imbalanced fiscal abilities for the different regional governments to be executive.3. Transfer Payment can realize the intergovernmental fiscal re-allocation through the capital flow in the regional governments, thus making the fiscal balance crosswise and lengthways, and the fair distribution of public service. Through the analysis of Regional Equalization Coefficient, Transfer Payment helps to reduce the disparities among regions, while the internal gaps increased and the fact of regional disparities still exists. This situation shows that the fiscal balancing function of Transfer Payment has not been fully utilized.4. The original purpose of making regional economic policies was to eliminate the economic disputes among regions, but in reality, the regional economic policies are always the reasons for their conflicts. Tax Expenditure has triggered the regional economic development, and also, it has enlarged the existing disparities.5. In reality, the several elements of Intergovernmental Fiscal Allocation constitute an integrated system, interacting with each other individually and collectively. Through quantitative analyses of the impacts of each element and its interactions on regional differences, we may find: (1) Foreign investments noticeably helped the economic development in eastern China and nationwide as well, while its assistance in improving the economy in middle and western China has not been up to significant test, which implies the Tax Expenditure policy in China increased the regional differences to a certain degree; (2) The present Intergovernmental Transfer Payment policy in China is not acting its role of balancing regional finances, i.e. to average the lowest levels of public service in different regions, which displays the policy of Transfer Payment being unreasonable and urgent to be reformed; (3) Tax income is the main source of government revenue, provides enough financial power for regional governments to interfere in the economy, and helps in economic progress. The division of tax income is the foundation of Intergovernmental Fiscal Allocation. However, the overweight of tax burden and its imbalanced distribution confined the coordinated development of regional economies; (4) There is a problem of the inflation of extra-budgetary funds as well as the fact of "fee-squeeze-tax", which goes worse in the middle and western China. This indicates the present financial system in China does not allocate intergovernmental finance according to expenditure duties, which widened the financial gap between the middle , western and the eastern China.