Abstract
Governance systems not only reflect the political and constitutional arrangements in different countries, including the administrative, legal, and regulatory frameworks, but also the underlying economic forces, including institutions, policy instruments, and information flows. The interactions are important, as is the sequencing of measures. The tendency of international experts and agencies to assume that more junior levels of government in China behave as they might in the US, often leads to inappropriate analyses and policy prescriptions. Similarly, focusing on the political or administrative aspects in isolation from the economic underpinnings may be a mistake.
This chapter reflects an ongoing work program on multilevel finance and sustainable development being undertaken by the author at the London School of Economics and Political Science (LSE). Many of the ideas have been presented at seminars at the LSE, Bonn, Turin, Peking, Sun Yat-Sen, and Zhejiang Universities. Helpful comments from Gao Xiang are acknowledged, and the usual disclaimer applies.
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Notes
- 1.
This refers to the general principle that characterized a series of reforms, starting with agriculture, then state-owned enterprises (SOEs) and local governments, and the associated fiscal arrangements.
- 2.
The US investment financing system functions, although the adequacy is open to question with the crumbling infrastructure in most major cities, highways, and bridges. The amounts of financing required far exceed the amounts linked to local tax bases and has led to the arguments for additional federally financed or guaranteed investments. This introduces game-play considerations into the US governance model that have yet to play out.
- 3.
It should be noted that the democratic electoral process does not preclude “bad decisions,” such as Brexit, or periodic capture by nondemocratic and xenophobic forces, such as during the 1930s.
- 4.
See also Ahmad and Brosio (2015) for more recent developments in the positive literature.
- 5.
This was dictated by both administrative constraints and revenue concerns, and while it created an additional cost for exporters, lower Chinese wage levels more than compensated for the disadvantage. This lacuna was addressed in the move toward crediting of input taxation on investments, or the shift from an investment-type to a consumption-type VAT, in the reforms of 2006.
- 6.
For a review of the positive theories of multilevel finance that address gainers and losers of alternative institutional and policy arrangements in relation to various interest groups, and associated policy implications, see Handbook of Multilevel Finance (2015).
- 7.
See Lou Jiwei, 1997.
- 8.
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Ahmad, E. (2019). Governance Models and Policy Framework: Some Chinese Perspectives. In: Yu, J., Guo, S. (eds) The Palgrave Handbook of Local Governance in Contemporary China. Palgrave Macmillan, Singapore. https://doi.org/10.1007/978-981-13-2799-5_3
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