Abstract
This chapter introduces the financing mechanisms for local infrastructure construction and service delivery in a town named Shaxi in Taicang City in suburban Suzhou. Shaxi town is located in the South of Jiangsu Province in Eastern China, near Shanghai. The chapter uses the Shaxi case study to illustrate strengths and weaknesses of local government finance in China and their relevance for other developing countries. As local governments in China play a leading role in investment and financing of public goods, this study begins by analysing the fiscal logic of China’s government hierarchy. Then, taking Shaxi Town as a case study, it provides a detailed description of the various sources of investment and financing available to local governments in China, and the problems different kinds of investment and financing address. Finally, this chapter suggests ways to improve financing, planning, construction, and service delivery for small towns in China at different stages of development from the perspective of overall, systemic reform. The findings should be of interest to local officials and planners involved with town planning in China and other developing countries.
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- 1.
Zhou (2006) measurement method: gross gap = local income—local expenditure, net shortfall = local income—local expenditure + subsidized income from higher-level governments.
- 2.
- 3.
Local governments’ behavioural strategies in China are formed in the institutional environment with no property tax. Due to the high cost of implementation of the property tax system, the Chinese government implemented the one-time land transfer system instead of the property tax system. Industrial and commercial land users and real estate developers pay entire land leasing fees for 40−70 years—a one-time land-transfer fee paid to local governments. Land transfer fees are divided and calculated as part of individual real estate purchasing expenses. So in the period of land using (40−70 years), the user pays no property taxes.
- 4.
According to the yardstick of per capita GDP, China’s economically developed provinces are all located on the southeast coast region.
- 5.
Hukou is China’s system of household registration. It allows the government to control and regulate internal migration, especially rural-to-urban migration, and control the infrastructures and services supply for a selected group of population.
- 6.
The construction and growth of economic infrastructure are particularly important in the short term; successful social infrastructure improves the long-term utility function of the residents. The social infrastructure production function may not change in the short run; however, in the long run, it should lead to growth through more productive human capital and more disposable income.
- 7.
“Three concentrations” means that industries are concentrated in designated planning areas, farmers are concentrated in communities, and agricultural land is consolidated into larger parcels, optimizing urban, industrial, agricultural, residential, ecological, and hydrographic planning and layout. “Three-replacements” means replacing cooperative stocks of land shares with contracted land, replacing commercial houses with homestead land, and replacing shares with collective assets. This is intended to optimize allocation of urban and rural resources. “Four-matchmaking” refers to matching urban and rural infrastructure, urban and rural public services, urban and rural social security, and urban and rural social management to integrate urban and rural environments/economies. (Suzhou Division of China Development Band, and Tongji University 2016.)
- 8.
The Maastricht Treaty approved in 1992 for measuring government risk, only feels an alert is necessary when total government debt reaches 60% of GDP.
- 9.
The liquidity insolvency index is the ratio of debt service payments to fiscal revenue. The international alert level is 10%.
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Acknowledgements
This research was funded by the National Natural Science Foundation of China (Programme No. 51708117), the Fujian Federal of Social Science Circles (Programme No. FJ2017B021), and Fujian University of Technology (Programme No. GY-Z17006). The authors also thank the team members of a research project titled “Research on the Vision and Models of Integrated Urban and Rural Development in Suzhou during the Thirteenth Five-Year Plan”, supported by the Suzhou Division of the China Development Bank and Tongji University (Dr. Chen Chen, Chenghao Fang, Su Xu, and others).
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Chen, X., Zhao, M., LeGates, R. (2020). Financing Local Infrastructure and Public Services: Case of Shaxi Town in Suburban Suzhou, China. In: Dahiya, B., Das, A. (eds) New Urban Agenda in Asia-Pacific. Advances in 21st Century Human Settlements. Springer, Singapore. https://doi.org/10.1007/978-981-13-6709-0_7
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