The chapter discusses the Federalist nature of China’s fiscal system under which provinces and localities are responsible for a substantial portion of fiscal expenditure. It describes Zhu Rongji’s fiscal tax reform of 1992 and the repercussions on local governments. The chapter also discusses the IMF estimate of an 18 trillion renminbi gap between local revenue and expenditures between 1998 and 2012 that was filled through land sales and Shadow Loans. It explains the importance of land in China’s local government financing. The methods utilized by local governments to generate revenue outside of the official tax channels are described.
KeywordsLocal Government Real Estate Central Government Social Housing Government Revenue
- Chivakul, M., et al. (2015). Understanding residential real estate in China. Washington, DC: IMF.Google Scholar
- International Monetary Fund (IMF). (2013, October). Local government financing platforms in China: A fortune or misfortune (p. 11). Washington, DC: IMF.Google Scholar
- International Monetary Fund (IMF). (2014, January). Fiscal vulnerabilities and risks from local government finance (p. 7). Washington, DC: International Monetary Fund.Google Scholar
- Ministry of Finance, Local Fiscal Statistical Yearbook, 2011.Google Scholar
- Powell, B. (2010, November 17). Chanos versus China. Fortune.Google Scholar
- Shih, V., Zhang, Q., & Liu, M. (2008). When the autocrat gives: Determinants of fiscal transfers in China. Victor Shih, Department of Political Science, Northwestern University, unpublished paper.Google Scholar