Fiscal System Changes And Economic Growth In China

Since the reform and opening-up, China's economic growth sustained nearly 30 years. China is one of the world's fastest growing economy, and this trend will continue. The rapid development of China won the world's respect and praise, international economics says China's growth is the so-called "China miracle", the mystery of China's growth model and the inherent law has become the world's largest theme of economics. the successful experience of the reforms in China undoubtedly have guiding significance for next reform, and also is very important for developing countries to realize the target of development.China's capital, labor, technological progress and human capital did not meet the basic requirements of economic take-off. In the process of China's reform , system reform improved the efficiency of resource allocation and stimulate the economy, played a decisive role in economic growth . The importance of the system in economic development has reach unanimity in the international economic circle, but the knowledge for mechanism of different system formation and role is not enough, so did china.The reform of fiscal system, as link point of the economic system reform and the reform of the political system, is the most important reform. In the special background of economy, system and culture, according to the experience of reform, the most important may not do " getting prices right ", because the market is incomplete, there wouldn't be right prices, More important is likely to be " getting incentives right ," because incentive mechanism is the subject of economic development , and the price mechanism only is one of incentive mechanism . Financial system is typical for system incentives , but it is not enough for institutional mechanism to economic growth , especially in the special background .Western theory of fiscal decentralization takes federalism in developed countries as research samples, the situation in China is very different from western country: (1) the constraint and pressure of Western local governments come from "vote" and "voting with their feet" of residents, and the local governments in China mainly face the constraint and the examinational of superior government,; (2) the policy goal of Western local governments is to provide local public goods, and the local governments in China's main target is the economic growth and the financial revenue maximization, (3) western local governments have independent finances power; China's financial system arrangement of power is in the central and local governments take action in its frame range (4) economic power of west local government administration is limited, China's local government master powerful administration and economic resources.Take the relationship of financial system reform and economic growth as the research object, the paper probes into encourgement of fiscal system to local government for realize economic growth under concrete condition of economic environment and system . Facing financial allocation system, in order to achieve economic growth and to maximize the revenue , local governments will make full use of political and administrative and economic resources to support industry and economic growth mode which help to achieve the goal of economic growth. This paper analyses effect of every fiscal reform to the benefit of the local government, behavior change and mechanisms to local government and effect caused by the pursuit of their goals and objectives behavior change and mechanisms to pursue of their goals ,probing system cause of fiscal system to promote economic growth. Based on the front analysis, the paper puts forward the principle and policy Suggestions to norm and adjust the relations between the governments and the resource allocation, better guiding local governments to promote economic growth. This paper includes six parts.Chapter 1, the introduction. This paper explains the background and significance of research, and important research reviews about fiscal decentralization at home and abroad , and China's fiscal system reform reviews. Research found that fiscal decentralization and economic growth in the evolution of time does not exist simple relationship. Purely fiscal decentralization and not adapt to the political and economic environment, not only can promote the economic growth, but may have something to the opposite. For financial system and economic growth, it needs to connect with the conrete economic system and the development of the market economy environment, behavior mechanism of local governments to promote economic growth etc, can get constructive and beneficial research results. Finally, the paper puts forward the framework and methods of this study, summarized innovation and the deficiencies .Chapter 2, Basic theories and research premise. This part define the concept of the fiscal system and fiscal system changes , fiscal decentralization and centralization. The paper pointed out emphatically the financial system refers to the special financial system, namely, the central government and the local governments at various levels and the division between financial resources and the contradiction. This paper introduces the basic theory : public choice theory and incentive mechanism theory. The the central and local governments, have different economic goals and behavior. The central government in the pursuit of economic development in the process of centralization and decentralization, maximize control in pursuit of economic development. The central government has political advantage, can achieve goals through reform and strengthen supervision.Our "vote" mechanism and "voting with their feet" mechanism is very weak, the promotion of the local government officials is based on economic growth.. Target of local officials become the goal of local government. At the same time, because of our country's socialist nature, local government has strong ability of resource and the political mobilization, make its economic growth. This fiscal decentralization process is the key to successful China's economic reforms .Chapter 3, reform process of China's fiscal system. This section introduce in detail the financial system reform in 30 years, from 1979 to 1993 to various forms of fiscal responsibility system and 1994 tax reform of the background, content were analyzed and discussed based on the economic development, especially the characteristics and market research, the stage of budgetary revenues and expenditures and resource allocation and economic development, points out the relationship between the central government and the local constantly adjust and adapt to China's rapid economic development needs, played a central macro-control effectiveness and incentive local government.Chapter 4, fiscal responsibility system and economic growth. In the 1980s, the whole society is shortage economy, low labor productivity, commodity market radiation, local government decided to invest in industrial enterprises to obtain financial income increase and economic growth, the benefits of local government mobilized all kinds of resources industrial enterprise behavior of market and promote the abundant economic growth. However, with the development of production and labor productivity improvement, repeated investment to the contradiction, the local government adopted the policy of local market segmentation and protectionism, financial measure-taking began to hinder economic development.In the 1980s, marginal rate the fiscal responsibility system as the index reflects the degree of fiscal decentralization, through the test, fiscal decentralization of economic growth that played a significant role, and fiscal decentralization can improve economic efficiency is consistent with the hypothesis. At the same time, we also found that investment growth, rural reform, and promote the development of the non-state sector is the key factor in the growth of China's economy, the local government to promote economy by promoting partiality investment.Chapter 5, Tax-sharing system and economic growth. The 1994 tax reform changes fiscal income distribution in central and local government, cause local government behavior and spending tends to have changed. Local government greatly reduce the impulse of industrial development from pursuing "all" to pursue "place", each place vigorously promote "attracting investments". Local government to promote economic growth point to "urbanization construction" to ensure fiscal and tax increase. At present, development of urbanization and the local government beheavior accumulated a series of political, economic and social problems.Refer to the reform of Tax-sharing system , we design four indexes from different angles and analyzed relations between the fiscal decentralization and economic growth. Research found that the tax reform significantly improve fiscal decentralization effect on economic growth, 1994 fiscal decentralization and economic growth is the coefficient, Introducing virtual variable, the corresponding regression support significant relationship between fiscal decentralization and economic growth.Chapter 6, Conclusion, suggestion and prospect. This section summarizes briefly the study conclusion, points out that the reform of the fiscal system in China meet the needs of the rapid development of economic society. In 30 years of economic development, the system decides the features obvious and clear.The smooth implementation of the fiscal system reform, there is a political advantage reasons, more important is to reform the incremental reform, the design of incentive mechanism of "participation" and "incentive compatible constraint", guarantee the constraints, reduced the resistance. Local government has a strong political and economic control, plays an important role in its economic growth in China, but also is the key of understanding the role of local government.In the current fiscal decentralization system, the biggest encouragement of local government come from tax land income related to "the urbanization". At present, it has led to a series of political, economic and social problems. If you don't change the present financial sharing system of local government, it has no power to change the current economic growth mode, and strengthening supervision solely isn't solve the problem. Article puts forward the principle of tax reform Suggestions and attention problems, and put forward the problems need to be studied further.