The Reform Of China’s Public Spending Management System Research: A Contract Theory Analysis

Public spending is the core part of public finance; the direction and scope demonstrate itseffects on the economy in all kinds of aspects. To some extent, rather than public revenue, publicspending is more likely to demonstrate its governmental functions. However, there are still manyproblems needed to cover, such as principal agent problem, the presence of opportunism,transaction costs, which have a direct influence on the distribution of resource. Each interestgroup takes a variety of means to influence legislation procedure and the impact of resourceallocation result. The budget aspects relate to government departments, the provincial departmentof governance and the property rights allocation, which directly influences the supply of publicgoods. Even if all Beijin offices have removed, the phenomena to offer a bribe still exists for along time. In the government procurement process, especially in large project bidding process,internal manipulation results exist for a long time, the voice to public the government publicspending information is higher than ever. Although our government begins to public more publicspending information through the internet, the information is still not that available.In the principal-agent contract in the process of government public spending，to maximizetheir profits, all levels of agents may appear opportunism behavior. How to design an effectiveincentive mechanism that the agent pursues their own interests while maximizing the interests ofclients at the same time, so as to get the overall improvement of Pareto best is the purpose of thisarticle. This article takes the modern contract theory as the breakthrough point, by analyzing theprocess of public spending in the levels of the principal-agent relationship and opportunism, tobuild the contract equilibrium framework which is based on game equilibrium and transactioncost change. Also, through the analysis of variables under principal-agent relation in game theorymodel, this article studies how to solve each level contract power allocation, supervision andrestraint, decentralization, motivation and information problems so as to find how informationdisclosure, discretion, budget adjustments, supervision, punishment and other factors in publicspending cycle affect the game equilibrium and institution innovation.Throughout the western countries public spending management system evolution, the changeof the United States public spending management system embodies the United StatesConstitution’s the principle of checks and balances and the principle of sovereignty in the people.The decentralization and balance principle embodied in the budget power game between the legislative mechanism (take the president as a representative) and administrative mechanism (takethe Congress t as a representative); the principle of sovereignty in the people embodies citizens’requirements to government accountability continues to increase. The former is more likely toreflect in the federal budget legislation process, while the latter becomes incisive in the previousbudget management system innovation. Looking back to the British government budget system’sbud since the thirteenth Century to maturity, the hundreds of years of evolution is what a processthat the British Parliament gradually stripped of sovereign financial power in the name of thelaws.The evolution of the British government budget system is closely linked with the parliamentarysystem’s formation and development. The changes of western public spending managementsystem step in a steady legal environment. There is the clear constitution and the system boundary,no matter it is about the power game and balance between government departments or the pursuitto budget ration. The built of the public spending management system based on spending circle,including the budget system in policy making, government procurement and payment system inpractice, Incentive mechanism and the supervision mechanism in advance, in the matter, after theevent, keeps the operation of the western public spending effectively.Based on the analysis of variable factors in Game model and the use of western publicspending management system for reference and linked the reality of China, this article focuses onthe competitive game behavior in public spending between the public and the government, thelevel of government and the department of spending, the department of spending and suppliers,and finally get the conclusion that the reform of Chinese public spending management systemneeds to consider not only the game between each interest group under the circumstance ofPrincipal agent relationship, but the transaction costs back to the system. Consensual contractrelationship will certainly create effective public spending management system, in the reform ofpublic spending management system, our government need to fix the democracy by normingsystem so as to build a long-term stability of the "rules of the road" system. It is essential to buildsunshine government system innovation path by” Sunshine budge, Sunshine-procurement,Sunshine-report “in the process of public spending.