Fiscal reform, decentralization and poverty alleviation in the context of China's 12th Five-Year Plan

Abstract

China is said to be one of the world's most economically decentralized countries. While the claim that economic as well as fiscal decentralization had much to do with the success of China's reforms is controversial and it has been argued that China's approach to administrative decentralization might over time threaten the success of the reform process, the highly remarkable extent of fiscal decentralization could have the potential to aid the effort at poverty alleviation, especially in the context of the ethno-regional dimension of the country's poverty problem, and reduce the extent of social stratification and enhance stability. This paper analyses the various issues related to fiscal reform and fiscal decentralization in China in the context of the country's 12th Five-Year Plan and explores the Plan's implications for poverty alleviation and the overcoming of stratification.

Keywords:

• China
• 12th Five-Year Plan
• fiscal reform
• poverty alleviation
• decentralization

Notes

1. Statistics from ‘Cong ‘liang shui fa’ dao ‘fen shui zhi’: zhongyang-difang boyi xia de caizheng shuishou zhidu’ (2009).

2. The term ‘xiagang’ refers to redundant workers mainly at State enterprises, without directly describing them as ‘unemployed’. Still officially attached to their work units or enterprises, the xiagang workers continue to receive basic minimum subsidies for their living and medical expenses, and are encouraged to change job, probably through State-run job and re-employment centres, or go into small businesses. In line with State enterprise reforms, the number of xiagang workers has been on the rise: 4 million in 1995, 8 million in 1996, 12 million in 1997, 16 million in 1998, 20 million in 1999, though dropping to 11 million in 2001 (Zhou 2006, p. 289).

3. Information on poverty reduction here is mainly drawn from that provided by the Zhongguo Fazhan Baogao 2007 (see especially pp. 92–93, Table 4.1). Such information and data in Zhongguo Fazhan Baogao 2007 were in turn drawn from 151 Chinese and English source references and 24 background reports.

4. Data from Zhongguo Fazhan Baogao 2007.

5. See Note 3.

6. Data from Zhongguo Caizheng (2008), Vol. 4.

7. Statistics from Zhongguo Fazhan Baogao 2007.

8. ‘San Xi’ (three ‘Xi’) refers to China's poorest region represented by Dingxi in Gansu province, the Hexi corridor and Xihaigu in Ningxia province, designated since early 1980s as the priority target for rural poverty reduction.

9. Statistics from Zhongguo Fazhan Baogao 2007.

10. These data from Zhongguo Fazhan Baogao 2007 were for the year 2003.

11. Data from Zhongguo Fazhan Baogao 2007.

12. Statistics from Zhongguo Fazhan Baogao 2007, p. 99.

13. ‘Yuan’ is the largest denomination of China's currency ‘renminbi’ (‘people's currency’, RMB), roughly equivalent to US$0.146.

14. Data from Zhongguo Fazhan Baogao 2007.

15. Billion = thousand million.

16. Statistics from Zhongguo Fazhan Baogao 2007, p. 100.

17. Statistics from Zhongguo Fazhan Baogao 2007. The survey was conducted in May 2005.

18. Statistics from Zhongguo Fazhan Baogao 2007.

19. Data from ‘Guowuyuan Fupinban Dangzu Chengyuan Jiang Xiaohua: ‘Shi'er Wu’ Fupin Kaifa Nandu Jiada’, Xinjiang Shengchan Jianshe Bingtuan ‘Shi'er Wu’ Guihua Zhuanlan (2010).

20. Data here are from Zhongguo Fazhan Baogao 2007. The survey mentioned was conducted in 2003.

21. See Note 20.

22. Data from ‘Guowuyuan Fupinban Dangzu Chengyuan Jiang Xiaohua: ‘Shi'er Wu’ Fupin Kaifa Nandu Jiada’, 2010.

23. An anti-poverty programme launched in 1993, called ‘eight-seven programme’ meaning that China would eliminate poverty of about 80 million people in seven years by the end of the twentieth century.

24. Data from Zhongguo Fazhan Baogao 2007.

25. See Note 24.

26. Data from ‘Guowuyuan Fupinban Dangzu Chengyuan Jiang Xiaohua: ‘Shi'er Wu’ Fupin Kaifa Nandu Jiada’, 2010.

27. Data from ‘Zhongguo Zhengfu Wang: Minzu Diqu Rengshi ‘Shi'er Wu’ Qijian Fupin Kaifa Youxian Didai’, 2009.

28. Data from Zhongguo Fazhan Baogao 2007.

29. Data from ‘Zhongguo Zhengfu Wang: Minzu Diqu Rengshi ‘Shi'er Wu’ Qijian Fupin Kaifa Youxian Didai’, 2009.

30. Data from Zhongguo Fazhan Baogao 2007.

31. Braun and Grote (2000) noted that in China ‘the allocation of responsibilities across tiers of government remains unclear, except for health and education which are controlled by the provinces [ … ] While administrative discretion has helped preserve the momentum for growth and reform, it has also created opportunities for corruption’ (p. 15).

32. As von Braun and Grote (2000) noted, provincial tax officers, aiming to establish some tax autonomy, ‘entered into direct negotiations with enterprises for payments and transferred tax funds that would otherwise have been shared with the central government into local extra budgetary accounts’ (p. 20).

33. Data from Zhongguo Fazhan Baogao 2007.

34. The seven prongs are (1) implementation of the rural boarding school system; (2) implementation of the ‘two exempts and one subsidy’ system to assist schoolchildren of rural families with economic difficulties in the western region; (3) long-term modernization of the rural primary and secondary schools; (4) greatly strengthening the teaching team in the rural areas of the western region; (5) deepening the reform in teaching and learning, and enhancing the quality of education; (6) expanding and strengthening direct assistance in education; (7) clear demarcation of the responsibilities of various levels of government in implementing this Plan.

35. That also include labour retraining and loans. Poverty reduction through loans, including microcredits, has in general not met with much success.

36. See Note 33.

37. Referring to the 31 sheng (i.e. provinces of Anhui, Fujian, Gansu, Guangdong, Guizhou, Hainan, Hebei, Heilongjiang, Henan, Hubei, Hunan, Jiangsu, Jiangxi, Jilin, Liaoning, Qinghai, Shaanxi, Shandong, Shanxi, Sichuan, Yunnan and Zhejiang), zizhiqu (i.e. ‘autonomous regions’ – each a first-level administrative subdivision having its own local government, and a minority entity that has a higher population of a particular minority ethnic group – of Guangxi of the Zhuang, Nei Monggol/Inner Mongolia of the Mongols, Ningxia of the Hui, Xizang/Tibet of the Tibetans and Xinjiang of the Uyghurs) and zhixiashi (municipalities under the central government – Beijing, Chongqing, Shanghai and Tianjin).

38. ‘Poverty is local and it can only be fought at the local level’ (UNCHR 1999).

39. Statistics from ‘Guodu Shichanghua yu Gaodu Fenquanhua Shi Zhongguo Yiliao Weisheng Gaige de Shuangchong Wuqu’, 2010.

40. Ibid.

41. Data from ‘Shi'er Wu’ Caizheng Gaige Zhaolidian’, 2010.

42. Data from ‘Jiedu Shi'er Wu Guihua Gangyao Zhiyi: Caishui Gaige de Luoji’, 2011.