Abstract
Section 4 of Article 3 in 82 Constitution actually reflects some exploratory political ideas more than it provides concrete normative model of Central and local relationship. China’s form of state structure and its system design are rich in intension. China is not a typical unitary system and there should be Local Governance according to 82 Constitution. The tension between centralization and decentralization presents itself variously in different periods accompanying the changes of fiscal and taxation system. Since 1994, the tax system reform, especially fiscal transfers, has strengthened centralization, influenced the Constitutional structure of Local Governance, and interfered with the delicate balance in the Constitutional framework. And its roots still lie in the internal tension of the Constitutional framework. Construction of modernization as the reason of state in 82 Constitution could provide normative purport in some sense for Section 4 of Article 3 aimed at dissolving the tension.
This paper is a report of work in progress for the project “Effects of Fiscal and Taxation System Evolution on Implementation of the Constitution” with financial support from the Jiangsu Department of Education college philosophy and social science fund and Jiangnan University youth fund.
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Notes
- 1.
The idea was deeply rooted in the minds of rural Chinese that “the imperial power does not reach the county levels where exists only the power of the family clan and they are governed by ethics and members of the gentry are good representatives of ethics.” This popular view was questioned and refuted by Professor Qin Hui with full and accurate historical data. Qin believed that state power, which was characterized by an “all the people are registered” administrative system, was a dominant power even in the administration of rural areas. See his book Ten Essays on the Chinese Political System, Culture, and their Innovation, published by Fudan University Press in 2008. These controversies have little effect on our argument, because this paper is to investigate the macro-power structure from the perspective of the relationship between the central and local authorities, and it is therefore not necessary to discuss whether there is the so-called “village autonomy” in China, be it by country gentry or petty officials; it does not affect the features of actual power division.
- 2.
In his report “On the Ten Major Relationships,” Chairman Mao Zedong pointed out: “our attention should now be focused on how to enlarge the powers of the local authorities to some extent, give them greater independence and let them do more, all on the premise that the unified leadership of the central authorities is to be strengthened. This will be advantageous to our task of building a powerful socialist country. Our territory is so vast, our population is so large, and the conditions are so complex that it is far better to have the initiative come from both the central and the local authorities than from one source alone.”
- 3.
In the draft of the 1982 Constitution, the original draft was that “division of functions and powers of the central and local authorities should follow principles conducive to the unified leadership of the central authorities and active play of the initiative and enthusiasm of the local authorities.” This was thought to be inaccurate and did not highlight the unified leadership of the central authorities. So it was altered to the current statement. See Cai Dingjian: “A Careful Reading of the Constitution” (2nd Edition), Law Press, 2006: pp. 174–175.
- 4.
In the midst of amending the 1982 Constitution draft, some members of the constitutional committee suggested it would be better to lay down more principles in the Constitution because division of functions and powers between the central and local authorities was a big problem, and China was short of experience in this area and needed a long period of exploration. This opinion was finally adopted. See Cai Dingjian: “A Careful Reading of the Constitution” (Second Edition), Law Press, 2006: p. 175.
- 5.
See more about “Competitive Federalism” in Dye [1, pp. 20–25, 189–193].
- 6.
Refer to the 1954 Constitution. It was stipulated in the 1979 amendment of the 1978 Constitution that the standing committee is established in the people’s congress at and above the county level, and this was more clearly stipulated in the 1982 Constitution. This was in fact a reform of the “combination of legislative and executive powers,” which was a salient feature of the local system in the past.
- 7.
The people’s government at the corresponding level may enact administrative rules and regulations.
- 8.
It was not until 1997 that the UK delegated authority to the Scottish Parliament.
- 9.
Although cities and counties do not have legislative power in the formal sense, their people’s congress and standing committee exercise functions and powers which belong to the broad category of legislative power.
- 10.
According to Article 64 of the Legislation Law of the People’s Republic of China, the people’s congress and its standing committee at and above major city level may enact local decrees for (i) matters for which enactment of a local decree is required in order to implement a national law or administrative regulation in light of the actual situation of the jurisdiction and (ii) matters which are local in nature and require the enactment of a local decree, except for matters enumerated in Article 8 hereof, in respect of any other matter for which the state has not enacted national law or administrative regulation and the people’s congress of a province, autonomous region, or municipality directly under the central government and the standing committee thereof may enact local decrees for the time being in light of its specific situations and actual needs. China’s allocation of legislative power is obviously quite pragmatic, not rigidly confined to a standard pattern. Some scholars analyzed the Chinese legislation characteristics of tool constructivism, economic centrism, and experimentalism from the national rationality of modernization and pointed out our neglect of democratic legitimacy. See Chen Duanhong: “Democratic Legitimacy of Legislation and Congressional Supremacy,” in Peking University Law Journal, 1998 (6).
- 11.
Of course, the discourse of mainstream ideology often emphasizes unity and coordination of the people’s interest, which seems to have covered up the contradictions. In fact, the unified leadership of the ruling party is a more important reason why those problems in theory don’t actually happen. But within the constitutional framework, the dual leadership system is unable to overcome its inherent tension, and the problems are just “latent” rather than disappearing.
- 12.
As a matter of fact, the inherent institutional tension exists not only between the central and local authorities but between governments at different levels and even more prominently between local governments. For the sake of convenience, the author makes no distinction between governments at different levels and takes them as a single entity that is the counterpart to the central authorities.
- 13.
For more information about the financial system before 1978, refer to He Fan, Constitutionalism for a Market Economy – Contemporary Fiscal Problems in China, China Today Press, 1998.
- 14.
Typical examples included the “fixed ratio contract” in Jiangsu and the “division of revenue and expenditure, classified contract,” in Sichuan. Ibid.
- 15.
See Wang Shaoguang & Hu Angang, China State Capacity Report, Liaoning People’s Publishing House, 1993.
- 16.
See Wang Shaoguang, Road to a Stable State: Targets and Ways of State Transition, SDX Joint Publishing Company, 2007: p. 5.
- 17.
Wang Shaoguang thinks that the expanded capacity of local governments to intervene in social and economic affairs does not mean the enhancement of state capacity; instead, it is likely to weaken the capacity of the central government to realize its will. Ibid.
- 18.
Ibid: pp. 14–15.
- 19.
According to statistics from the Ministry of Finance, China’s full-caliber fiscal revenue jumped from 3260.5 billion yuan in 2003 to 7760.8 billion yuan in 2007, with its proportion in GDP rising from 24 % to about 30 %. If the new debts and “outside the system” revenues were taken into account, China’s tax and nontax revenues in 2007 accounted for 39.1 % of its GDP that year. According to the statistical yearbook, the central government’s share in government revenue increased from 22 % in 1993 to 55.7 % in 1994 when the tax-sharing system was introduced, while in 2002, it was 55 %. The analysis that follows will show that most of the tax revenues poured into the central fiscal accounts.
- 20.
For more about the tax-sharing system reform, refer to Zhang Qianfan et al.’ Constitutionalism, Rule of Law, and Economic Development, Peking University Press, 2004: p. 245.
- 21.
See Zhang Qianfan et al.’ Constitutionalism, Rule of Law, and Economic Development, Peking University Press, 2004: pp. 247–248.
- 22.
According to the 2009 Central Budget by the Ministry of Finance, the central fiscal revenue in 2008 was 3,267,199 million yuan, about 53.3 % of the overall tax revenue.
- 23.
This also confirms the author’s point of view: the tax-sharing system reform of 1994 did not aim high at fiscal federalism or even the constitutional structure; it was basically confined to changing the structure of fiscal revenues between the central and local governments.
- 24.
See Liu Jianwen, Tax Law, Higher Education Press, 2004: pp. 128–129.
- 25.
Strictly speaking, tax rebates do not belong to the financial transfer payment; they are a compromise to ensure smooth implementation of the tax-sharing system reform. We analyze it here because tax rebates can also achieve the effect of a financial transfer.
- 26.
After oil product price and tax reform, it was used to replace the original tax rebates for highway maintenance tax and another five taxes and fees. Its calculation is based on the 2007 income of highway maintenance tax and the other five taxes and fees and allows a certain growth rate due to the actual situation of local economy.
- 27.
The above data are quoted on August 1, 2009, from the Ministry of Finance website, http://www.mof.gov.cn/mof/zhuantihuigu/zhongguocaizhengjibenqingkuang/caizhengtizhi/200905/t20090505_139525.html
- 28.
See more in “2008 Central Finance Income Statement” and “2008 Central Finance Expenditure Statement” released by the Ministry of Finance.
- 29.
See Liu Jianwen, Tax Law, Higher Education Press, 2004: pp. 143–145.
- 30.
Ibid: p. 133.
- 31.
In 2009, some of the special transfer payments were incorporated into general transfer payments, but the proportion of general transfer payments, about 47.5 %, was still low.
- 32.
See Dye [1, pp. 99–103, 112–114].
- 33.
See Wang Shaoguang, Political Logic Behind Fiscal Transfer Payment in China, Strategy, and Management, 2002(3).
- 34.
Fiscal balance and coordination in Germany is carried out by independent state and federal financial settlement centers, while in Australia special Federal Appropriations Committees are set up and their tasks, powers, and duties are defined through legislation.
- 35.
See Dye [1, p. 108].
- 36.
Ibid: pp. 111–112.
- 37.
Special transfer payments in 2009 amounted to 1,257,988 million yuan, an increase of 26.2 % over 2008, accounting for 52.5 % of the central fiscal transfer payment.
- 38.
See Dye [1, pp. 105–107].
- 39.
The real estate policy in China today is a good example.
- 40.
Local governments, from the provincial to the county level, have set up a multitude of liaison offices in Beijing under various names. One of the main missions of these offices is to win transfer projects from the central ministries; the ministries with more projects and financial resources, such as the National Development and Reform Commission, have more powers. After announcement of the four trillion investment plan, lobbyists from around the world, including from many multinational corporations, are said to have visited the relevant central ministries and commissions in order to have a finger in the pie.
- 41.
The Ministry of Finance issued “Guidance on reporting of local governments on fiscal budget, the final budget and budget implementation to the People’s Congress at the corresponding level” (FB [2005] 454), which barely made any requirements on the inclusion of special transfers in the fiscal budget. Though special funds are somewhat reflected in the final budget of local governments, apparently the ex-post supervision has little effect.
- 42.
For every 1 % increase of local value-added tax and consumption tax revenues, 30 % of the increments go to the local government.
- 43.
See Zhang Qianfan et al. Constitutionalism, Rule of Law, and Economic Development, Peking University Press, 2004: p. 245.
- 44.
See Ma Guoxian, Solving Financial Poverty: Key to Building Harmonious Fiscal Relations Between Governments, Journal of Tongling University, 2007(4).
- 45.
At the annual meeting of China Development Forum 2006, Deputy Minister of Finance Lou Jiwei and Economist Yifu Lin had a heated debate over the “financial powers and responsibilities,” making public the long-standing debate over the development of the tax-sharing system reform in recent years. Lou said that it would be wrong to integrate responsibilities and financial powers. See http://news.sohu.com/20060412/n242767815.shtml, Sept 20th, 2009.
- 46.
See Zhai Xiaobo, On Implementation of the Constitution in China, China Legal Publishing House, 2009: pp. 17–26.
- 47.
In both President Jiang Zemin’s report at the 16th National Congress of the CPC and the new Party Constitution, the development of socialist democratic politics and the construction of socialist political civilization is identified as an important goal of building a moderately prosperous society and one of the three basic goals of socialist modernization, together with “material civilization” and “spiritual civilization.”
Reference
Dye TR (1990) American federalism: competition among governments. Lexington Books, Lexington
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Fang, M. (2015). A Constitutional Analysis of China’s Fiscal Transfers—The Perspective on Central and Local Relationship. In: Liu, X. (eds) Public Budgeting Reform in China: Theory and Practice. Research Series on the Chinese Dream and China’s Development Path. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-662-47776-2_4
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