Study On The Impacts Of The Reform About "Direct Administration Between Province And County" Financial System In Henan On Economic Growth And Financial Self-sufficiency Rate

Reform of the tax system in1994complied with the market economy development request, played an important role in regulating the relationship of the central and provincial government financial framework and strengthening macro-control capacity of the central government, the reform has achieved a remarkable success in many aspects over the past two decades years. However, the conflict between the property rights and expenditure responsibilities has become increasingly prominent between the local governments below the provincial. There is a big deviation between the financial authority and the disbursement responsibility. This situation has not only caused the local finance difficulty, but also hindered the sustainable economic development. The fiscal system below the provincial needs reform eagerly.In this historical background, for the sake of solving the financial difficulties of the country and township, promoting economic development of county, improving the level of local public services, a fiscal reform which someone called "Direct Administration between Province and county" started running at the beginning of this century. Currently, more than20provinces in the country are implementing reforms, and the effect is obvious in some areas. At the same time, the reform of some areas also has a lot of problems. So there are also different kinds of this question in academia.The research topic of this article is the effectiveness of the county’s economic growth and financial self-sufficiency rate brought by the reform. The authorread many related articles at home and abroad, compared with other modes in China, used different theoretical perspectives including Fiscal Decentralization theory, Organization flattening theory, Principal-agent theory to explore the mechanism of the reform, collected a lot of data about Henan, established econometric model by Difference-in-difference Method, in order to research the impacts of the reform on economic growth and financial self-sufficiency rate. Then discovered the problems in reform and put some forward reasonable suggestions.