The Influence Of Chinese Style Decentralization System On Economic Growth

For more than three decades since the reform and opening-up,the economy of China has made great achievements and created a "growth miracle",but it also facing serious difficulties and challenges.These are closely related to all aspects of incentive mechanism provided by "Chinese style decentralization".Under the current system,local officials play a very important role in the regional economic growth.This paper analyzes the institutional basis and driving mechanism behind economic growth,which provides policy reference for deepening the reform of supply side.This paper examines further the effects of Chinese style decentralization on economic growth with city level data,which involves the economic effects of fiscal decentralization and promotion incentives.This paper analyzes the regional heterogeneity.Chinese style decentralization may have different impacts on economic growth.On the one hand,Chinese style decentralization provides economic incentives and promotion incentives for local governments.By the competition for investment attraction,strengthening infrastructure construction and expanding the opening to the outside world,the local governments promote the regional economic growth effectively.On the other hand,Chinese decentralization brings negative effects on the sustainability of economic growth,such as inefficiency,inadequate innovation and social welfare loss.On this basis,this paper puts forward three hypotheses:(1)For the economic incentives from fiscal decentralization,local officials will be under financial stress or effort for the realization of its own interests and they will promote regional economic growth;(2)The term economic growth performance and official promotion positively related and the promotion probability of local officials is influenced by two kinds of "benchmarking" : one is the economic performance in other cities in the province,the other is the economic performance in former officials.The "benchmarking" provides official for competition pressure of promotion;(3)when personnel changes frequently,they may behave short-term and then have a negative impact on economic growth.In the empirical test,first of all,the article establishes regression model,validating the positive effects of fiscal decentralization on regional economic growth.At the same time,fiscal decentralization of the east and the central regions has a significant role in promoting economic growth while the western region shows insignificant.Secondly,by using the Probit model,the paper verifies that the economic performance of local officials during his tenure has a significantly positive correlation with the promotion.The economic performance of other cities in the province or the former officials will get official pressure on promotion competition.Local officials of developed eastern region have more opportunities for advancement than officials who are in western region.Finally,the paper constructs official replacement variables.The regression equation shows that frequent changes of officials will have inhibitory effect on regional economic growth.The results of east and central regions are consistent with the overall performance,while the performance of western region is not obvious.In order to make full use of profits of the Chinese style decentralization and minimize its negative externality,this paper puts forward several policy suggestions:(1)Weaken the status of GDP in performance appraisal;(2)Form effective public supervision system;(3)Improve the equalization of transfer payment system;(4)Optimize public expenditure structure;(5)Reduce the direct intervention of local officials in economy.