The Impact Of Chinese Local Government's Behavior On Regional Financial Difference:Theoretical And Empirical Research

In 1978-1993, because of the country's pursuit of economic growth, after weighing the superiority of the eastern region, the country implemented the preferential policies to its, so the eastern region had achieved rapid economic growth, and the country had achieved it's economic development goals. However, the preferential policy for the central and western regions was unfair, it made the gap between the backward area and the eastern region rapidly widening, which led the regional distribution of financial resources to present a obvious "dual" structure.After the country had implemented the reform of tax system in 1994, the local government's financial capacity declined year by year, especially for the development of relatively backward in the central and western regions, the financial pressure increased rapidly, resulting in local government had increased the degree of intervention to regional financial. The central and western region's financial liberalization was slow, with high proportion of state-owned economy, in the case of financial capacity was very weak, the local government had increased the intervention of credit to financial institutions, but this kind of behavior was unfavorable for itself relatively backward areas,it serious impact the financial development. For the developed eastern region, despite the increased financial pressure, but its far less than the central and western regions, and due to its relatively high degree of financial liberalization, the privatization economic structure had higher degree, so the local government had less intervene in its financial, its financial development of capacity still remained strong. With the accumulation of time, China's regional financial difference had widened further.This article first analyzes the present situation of regional financial difference and the local government intervention, which mainly include the tax reform process, the main form of the local government intervention and the performance of the regional financial differences, we found that the regional financial difference further widening after 1994. Secondly, we do the theoretical analysis on regional financial difference and the behavior of local government,mainly include the impact of financial pressure and the economic structure,and we propose a theoretical hypothesis. Finally, we test the theoretical hypotheses by the empirical analysis,and draw the conclusion:China's regional financial difference is further enlarged under the local government's intervention. Based on the regional financial difference under the local government's behavior, our country should further improve the financial system, implement differentiation policies for regional development; the local government should clarify its responsibilities, and accelerate the reform of regional financial system's liberalization.