Research On Fiscal Decentralization During China Economic Growth

Since the 80s of the 20th century, A wave of fiscal decentralization emerged in the world. However, there is a large theoretical dispute about the correlation between the fiscal decentralization system and the economic growth, and two very different opinions are formed. The dispute focuses on whether fiscal decentralization significantly promoted economic growth, the differences due to that the way is not yet clear, by which the decentralization acted to the growth. And the correlation study between that two are also not strongly supported by empirical data,with the uncertainty of empirical tests. Therefore, that has important theoretical and practical significance to the transformation of China ,which included the exploration of the action mechanism between the fiscal decentralization and the economic development and how to improve the theory of financial decentralization.The author believes that the consequences of fiscal decentralization are multi-faceted, related to a country's economic, political and legal system is closely, but also influenced by the country's history, culture and other factors. The role of the decentralization to the economic growth is also comprehensive, and it is unscientific that it was evaluated as the "promotion" or "obstacle". In this paper, combining the results of Chinese reform and opening-up ,we try to analyse this issue in-depth and demonstrat that the fiscal decentralization reform promoted China's economic development in the institutional level.The existed theory of fiscal decentralization particularly expatiates the signification of economic growth preferences from the residents, local government information superiority, and officals of government incentives. It provides a more comprehensive theory of reference for the government practice. The success of the implementation of fiscal dencentralization of the world's major developed countries has provided valuable experience in the international reference for China's fiscal decentralization.As an integral part of the reform of the system, China's fiscal decentralization has played in an irreplaceable role for the establishment of a socialist market economy. Based on three decades of reform and opening up the brilliant results achieved, China has been recognized as a successful example of the academic transition to a market economy. The prominent characteristic of Chinese-style decentralization reform is the asynchronous of economic decentralization and political reform of the management system, and forms a Chinese-specific financial incentives and political incentives .First, fiscal decentralization has been a clear level of local government as a stand-alone financial position of the main, provided an important financial incentive for the promotion of economic growth .Second, China's economic growth at the core performance appraisal system for officials provide a strong political incentive. Local government officials have more power to promote the economic development area for the necessary of self-promotion. Third, fiscal decentralization has introduced competition mechanism between governments, hardened of budget constraints. Infrastructure construction to improve the investment environment has become an important policy choice of local governments. Accompanied by the formation of a unified national market, elements of the free flow of local governments have had a strong competitive pressures, increased government aid the cost of poor management of enterprises, thus hardened the government's budget constraint. Fourth, after the decentralization reform, local governments also have the right to have the ability to carry out policy experiments under the jurisdiction of the necessary conditions. This effect increase Chinese innovation in government management system elements from the system level. All of these had a significant positive impact on China's economic growth, the perfect of the elements system has a strong impetus to China's economic development.Things are dialectical, China's fiscal decentralization has made grade at the same time have given rise to adverse effects such as Part of the vicious inter-regional competition, a serious situation duplicate construction, uneven development between urban and rural areas. Practice has exposed the deep-rooted problem, the objective demands on our theory of fiscal decentralization on a new round of exploration.In order to further improve the system of fiscal decentralization and fundamentally change the incentives of local actors, we put forward the following policy recommendations:Firstly, we should clear the Government's power and scope of financial expenditure. First of all, we should scientifically define the relationship between the government and the market, Transform the government's functions, clear the government's stability, distribution, allocation of economic duty and set up the public finance system. The government achieves economic growth from the simple management functions to provide quality public service functions, strengthen the dominant position of market and correct the finances'"absence", "offside" and "wrong" in order to achieve transition from production-oriented financial to public finance. Second, we should make clear central and local governments at all levels say, rationalize the relationship between central and local governments and set up effective coordination mechanisms between governments at all levels. The focus is to detail expenditure responsibilities and clearly define in order to prevent cross buck.Secondly, we should standard all levels of government revenue and orderly adjust its main source of revenue. Local government should be based on the actual situation of them to implement specific measures on the precondition of the majority of the legislative power of local taxes which central government has. We have to conduct a value-added tax reform and place our property taxes as the main source of revenue. In addition, we have to standardize the collection of taxes and fees of local governments and rich means of financing local government.Thirdly, we need to improve the system of transfer payments. We want to explore the transfer of vertical and horizontal transfer of the organic integration of the model at the separation of powers system and through horizontal transfer to narrow the income gap between regional inter-urban and rural areas and promote the balanced development of regional economy. We should set up inter-provincial transfer payments in order to resolve the current financial difficulties of grass-roots government at the moment.Fourthly, we should improve the basic system of construction-related. First of all, we should reform the mechanism for performance evaluation of local officials and actively promote the establishment, including the long-term green "GDP" evaluation system. At the same time, we enhance the area residents in "bottom-up" assessment efforts and evaluate roundly the performance of local governments and officials. Secondly, the central government should strengthen the supervision of local government, resolutely put an end to the vicious competition between local governments and punish such as acts of "achievement projects" and "face projects" in order to ensure local governments have the right to express their views to central government. Finally, it is necessary to speed up the legal system, further standardize the government's actions and reduce the government's excessive administrative intervention in market in order to monitor the formation of bound systems between the government and the market, the higher and lower levels of government.