New development: China renews reform of central–local fiscal relations and provides for basic national public services

ABSTRACT

China’s reform on central–local fiscal reform has slowed down in recent years. The appointment of a new finance minister experienced in local government affairs is expected to renew the reform affirmed by the Chinese Communist Party (CCP) congress in late 2017. China has unprecedentedly identified a comprehensive list of 81 national basic public services as entitlements. Eighteen of them are subject to national and local standards, and co-financed by central and local governments. A new cost-sharing method for 10 of these services classifies sub-national jurisdictions into five tiers, in which the central government’s share declines from 80% to 10%. These measures, effective in 2019, aim at creating a ‘harmonious and moderately prosperous society’.

KEYWORDS:

• Basic national public services
• central–local relations
• fiscal reform
• poverty alleviation in China

Acknowledgement

The author thanks Xue Liquan and Yuan Liansheng for discussions on policy implementation and educational finance, respectively, as well as XiaoHu Wang, Zhang Guang, Jerry Zhao, Zhu Xueguang, Zhu Li-An for reviewing parts or whole of an earlier draft. I am solely responsible for the content and any remaining flaws.

Notes on contributor

James L. Chan is Professor Emeritus of Accounting, University of Illinois at Chicago, USA.