Research On Relationship Between Fiscal Decentralization And Upgrading Of Industrial Structure In China

China took out the first step of economic reform oriented towards market economy since1978, and it has been in the trend of high-speed growth for decades, which can be considered as the contribution of multiple factors. Among these factors, fiscal decentralization has been paid plenty attention to as an important element during the transition from planned economy to market economy. The research on growth effect of fiscal decentralization has also been much improved. Above this, China is now in the critical period of strategical adjustment in industrial structure, calling for more and more focus on the impact of fiscal decentralization on industrial structure.The article builds up a comprehensive mechanism describing the impact of fiscal decentralization on industrial structure. It not only investigates the direct effect in the mechanism, but also explores several indirect transmissions in it.First of all, the article looks into the direct effect of fiscal decentralization on industrial structure and conducts regression analysis on sample data according to the critical time point of the carrying out of system of tax distribution. The result reveals that fiscal decentralization significantly had held back the upgrading process of industrial structure before the reform of tax distribution, and that it has been playing the opposite role after it.Then, the article explores the indirect transmissions of fiscal decentralization to industrial structure. It mainly considers four ways of transmissions:urbanization, foreign direct investment (FDI), foreign trade and investment in infrastructure. The results are as follows:(1) Fiscal decentralization pushes up the upgrading process of industrial structure during the transmissions of urbanization, FDI and foreign trade, and it impedes the upgrading process during the transmissions of investment in infrastructure;(2) The contribution of indirect effect of fiscal decentralization on industrial structure is larger compared with direct effect, which means that fiscal decentralization affects industrial structure mainly through indirect transmissions;(3) Among the indirect transmissions, investment in infrastructure contributes most to the total effect. It explains why we only observe trivial overall effect of fiscal decentralization on the upgrading process of industrial structure.