Local versus central governance in China: Providing basic public services

http://www.eastasiaforum.org/2011/09/17/local-versus-central-providing-basic-public-services/

"At present, government revenues to provide basic public services are distributed unevenly between the central and local governments. Since the tax distribution system was set in 1994, the central government has been responsible for 50 per cent of all public revenues. Despite this, it has provided less than 10 per cent of the funding for the three basic public service spheres of compulsory education, public health and social security. Ninety per cent of the fiscal investment in these areas is carried out by local governments.

Differences in revenue between regions ensure that the level of basic public services provided across those regions will not be equal. For the most part, the level and quality of public services in the developed eastern regions are much higher than in the less-developed western regions. This phenomenon is very clear in the three public services spheres under discussion.

The current system of transferring revenue inhibits the provision of basic public services on a more equal footing. Not only does it fail to promote equal distribution of basic services, but it has also widened regional differences in service provision.

If China wants to achieve the goal of delivering public education, public health and social security at equal level across the nation, then the central and provincial governments should assume equal fiscal responsibility for providing these services. To this end, financial and administrative powers should be redistributed between the central and local governments until they match each other, and the current system of public revenue transfer should be reformed.

To achieve this, the existing system of tax revenue return should be gradually abolished. All general revenue transfer items should be integrated, bringing their attributes and functions into play. In addition, special revenue transfer programs should be strictly limited, and a better system of sub-provincial revenue transfer developed. It would also be profitable to explore a new system of revenue transfer which combines the current vertical and horizontal transfer systems."

China’s prospects for diminishing regional disparities

http://www.eastasiaforum.org/2010/08/31/chinas-prospects-for-diminishing-regional-disparities/

"Will rapid industrial development in the less-developed centre and west reduce these inequalities in the next two decades?

This question permits an optimistic response: ‘yes, it is possible’. Recent analysis indicates the glory days of the east’s industrial dominance could be coming to an end, with the region no longer performing above the average across the broad spectrum of industrial sectors. In addition, there is evidence of rising costs in the east, which will provide the impetus for industrial upgrading there. In this context, a serious and committed pro-west (or at least non-pro-east) regional policy with substantial funding well spent on infrastructure and education could play a positive role in triggering self-sustaining industrial development outside the eastern region. Rising incomes in the east could provide a crucial source of demand for non-eastern products, with the east possibly becoming for western China what the industrialised world has been for the eastern region during its own industrial take-off – a stable consumer market.

However, for this to translate into a reduction in regional income inequalities would require the western region to grow faster than the east by at least 2 percentage points.  It is unlikely that changing patterns of industrial development in response to market forces and the current set of regional policies will be sufficient for achieving this objective . Even when taking other non-industrial factors into account, such as the potential for out-migration and resource rents to raise the per capita incomes of those who remain in the western region, it is unlikely that the speed of growth in western China will drive Chinese regional incomes towards equality.

The pessimistic response is that; ‘no, industrial development in the less-developed centre and west cannot possibly reduce these inequalities in the next two decades’. Even if rising costs in labour-intensive manufacturing in the east produced industrial upgrading there, industry would relocate outwards to competitor nations such as India and Vietnam. Western China would then be characterised by substantial pockets of poverty and underdevelopment. The east would become increasingly integrated into the global economy, while the west would remain isolated from the rest of the world.

This outcome would pose a serious threat to the legitimacy of the Chinese Communist Party, especially if it fails to implement policies effectively that reverse the situation.

What, then, is the most likely outcome?

The balance of evidence suggests an outcome somewhere in between these two extremes. The next two decades are likely to witness limited improvements in the distribution of regional per capita incomes underpinned partially by limited re-distribution of industry towards some but not all of China’s non-coastal provinces.  Thus regional inequality between the west and the rest of China is likely to be diminished marginally at best."

대만 부유세 추진

대만과 한국은 여러가지로 유사한 점이 많은 국가들.

여기서 달라지는군.

http://www.yonhapnews.co.kr/bulletin/2010/09/30/0200000000AKR20100930147200009.HTML?source=rss