Research On The Institutional Change Of Public Finance And The Economic Development Performance In The Transitional China

The tax distribution system reform implemented in1994preliminarily straightens out the fiscal allocation relationship between central and local governments, which contributes to the consolidation of central government’s macro-control ability and mobilization of local governments’ enthusiasm; however, the fiscal allocation framework of tax distribution system in governments under provincial level is far from complete. Due to power asymmetry between authority and finance, fiscal conditions in county-level are caught in deep waters, leading to heavy liabilities of county and township-level governments and difficulty in fund procurement. Meanwhile, as the establishment and improvement of socialist market economic system, the drawbacks of "city administrating county" fiscal system become increasingly obvious. Redundant administrative levels, overwhelming pressure on local fiscal expenditure, as well as phenomena like "city exploiting county" or "city restraining county" all result in sluggish economic development in county regions.In order to solve fiscal difficulties of county and township-level governments and push forward economic development of county regions, fiscal system reform of direct administration between province and counties are adopted in several pilot provinces like Zhejiang Province, starting from State Council’s release of Endorsement of Ministry of Finance’s Suggestions about Improving Fiscal System under Provincial Level. In2006and2009, the central government put forward fiscal system reform of "direct administration between province and counties" and comprehensive system reform of "enlarging authority and strengthening counties" twice in the form of No.1document. Until now,22provinces and municipalities have successively adopted pilot fiscal system reform of direct administration between province and counties. By the end of2012, this reform will be implemented all over China, except for national autonomous regions. Following this fiscal system reform, a profound system reform will soon raise its curtain. The reform orientation implied in this fiscal system reform will definitely bring about significant influence on our nation’s political, economic and cultural systems.Based on the above-mentioned background of system reform, the thesis conducts empirical studies about fiscal system transference and economic development performance from the perspective of fiscal system reform of direct administration between province and counties. The author strives to grasp the general rule and evolution trend of fiscal system transference and figure out the mechanism and profound impact of fiscal system transference on economic development performance, so as to provide theoretical support and policy suggestions to deepen this fiscal system reform. This is the purpose of the thesis and the goal which the author strives to achieve.1、Significance of the ResearchThe thesis is of theoretical and practical significance by probing into the relationship between fiscal system transference and economic development performance during transformation period from the perspective of system reform of direct administration of provinces and counties. Based on theoretical principles about system transformation in neo-institutional economics, the thesis applies analysis method of the institutionalism to delve into the background, reasons, achievements and problems of fiscal system reform of direct administration between province and counties, revealing influencing factors of fiscal system ’transference on economic development performance and proposing policy recommendations so as to straighten out fiscal relations between governments, optimize public fiscal system, push forward reform of governmental agencies and achieve duty transformation of government. Fiscal decentralization theory and government behavioral theory will also be enriched and improved. Since time immemorial, it is widely accepted that the world will be in peace once all counties are well-governed, and the nation will be prosperous once the counties are strong. By explicitly stipulating fiscal responsibilities of all levels, implementing flat management, and improving administrative efficiency, fiscal system reform of direct administration between province and counties create conditions for boosting economic strength in county regions, coordinating harmonious development of urban and rural areas, and solving Three Rural Issues (rural areas, agricultural and peasant). It also possesses practical significance for realization of important strategies of the nation and system construction of a modern state.2、Contents of the ResearchBased on the analysis of theories about system transformation in neo-institutional economics, the thesis investigates the process of fiscal system transference in China and analyzes the achievement of the pilot fiscal reform of direct administration between province and counties from the new view of the pilot reform. It mainly includes seven parts as follows:Part One introduces the research background and meaning, content and methods, and the present situation of the study, analyzes the possible innovation and deficiency. It emphasizes the theoretical values and practical meaning of "The Study of the Institutional Change of Public Finance and the Economic Development Performance in the Transitional China", briefly proposes the major theoretical viewpoints of the province administrating county financial system reform at home, shows the theoretical innovation and technical difficulties we face in this paper.Part Two establishes the logical starting point and theoretical framework of the research. Based on comparative analysis of the similarities and differences of the new institutional economics and institutional economics school on the theory of system transformation, interprets systematically the general theory of the system and system transformation of neo-institutional economics. On the basis of demonstrating mechanism of system transformation on economic development performance, analyzes the underlying mechanisms of system transformation and economic development performance, builds the theory framework of it, lays the theoretical foundation for the quantitative analysis of the impact of fiscal system transference on economic development performance. Part Three reviews the evolution of fiscal system and economic performance since the founding of China in1949. This thesis methodically reviews the historical evolution of fiscal management system since1949including policies of unified state control over income and expenditure, classified management, classified contract and classified tax system, etc. and makes a comprehensive analysis on the institutional environment, motivation and characteristics of the fiscal system evolution as well as the impact on economic development caused by the change of fiscal relationship between central and local governments.Part Four reviews the specific modes and achievements of the fiscal reform of direct administration between province and counties in specific provinces. Based on the difficulties of economic development in county-level regions, this thesis methodically analyzes the background of pilot fiscal reform and gives a brief introduction on the status quo of the reform with a focus on analysis and evaluation on the specific modes, characteristics and initial achievements of pilot reform to demonstrate the difficulties in front of the fiscal reform of direct administration between province and counties.Part Five summarizes the specific measures and major achievements in implementing fiscal reform of direct administration between province and counties in Sichuan Province. Through the comprehensive introduction of the scope, standards and contents of the pilot reform in Sichuan Province, this thesis presents a systematic analysis on the implementation and achievements of the fiscal reform taking Jianyang County as an example which features a population over one million and economic characteristics of hilly area in western China. Based on the fix index of fiscal performance including incentive, control, distribution, equality and stability, this thesis measures the achievement of fiscal reform of direct administration between province and county in Jianyang County by means of quantitative analysis so as to verify theories of financial system transference and economic development, providing a solid theoretic support for the pilot fiscal reform of direct administration between province and counties. Part Six makes a comparative analysis on the characteristics of fiscal management system in major western countries. After a summary of fiscal transference of central and local governments in foreign countries, this thesis pays close attention to the features of fiscal system in major western countries and proposes suggestions for promoting fiscal reform of direct administration between province and counties such as further clarification of administrative responsibilities among all-level governments, strengthening fiscal transference payment and proper decentralization of fiscal system, etc. by means of comparative analysis.Part Seven provides suggestions in policy level for deepening the fiscal reform of direct administration between province and counties. This thesis summarizes the initial achievements in the reform and also points out major problems in pilot reform including lack of a supportive administrative system, unbalanced administrative and fiscal system, lack of consistent policy support and lack of a sound fiscal income and expenditure system. Therefore, this thesis makes3suggestions:1. in order to promoting fiscal reform of direct administration between province and counties, the role of government should be modified with a clear distribution of responsibilities;2. the payment transference system should be optimized to expedite the development of local fiscal administration system;3. The county-level governments should improve the fiscal income and capital management ability by means of enhanced supervision and control.3、Innovation of the Research(1) Based on the assumption that fiscal system is endogenous under economic development and from a brand-new perspective of fiscal reform of direct administration between province and counties, this thesis comprehensively utilizes the theories of fiscal decentralization and government behavior on the basis of system transference theory of the new system economics. The research is of some difficulties but it is also an innovative research in terms of the analysis prospective and across-discipline research model.(2) Based on the assumption that fiscal performance will affect economic development, this thesis measures the impact of fiscal reform on the economic growth by5index of financial performance including incentive, control, distribution, equality and stability. This method is also an innovation.(3) Another innovation of this thesis is that based on the assumption that government is "an economic person" under constraints, the thesis reviews the change of government property right (distribution right) relationship and transaction cost resulted from fiscal system evolution by means of benefit-cost analysis and game theory, thus analyzes the impact of fiscal system evolution on economic development.4、ConclusionBased on system transformation theory in neo-institutional economics, the thesis comprehensively analyzes the pilot fiscal system reform of direct administration between province and counties and summarizes about them from the aspects of theory and practice, reaching the following conclusions about the relationship between system evolution and economic development performance.(1) System revolution is the determinant factor in economic development performance. An effective market is the prerequisite for economic growth and a complete property right system is the condition of the formation of an effective market. A complete property right system, especially an exclusive one, can decrease or even eliminate all uncertainty, and consequently realize the effectiveness of market, decrease transaction fees, stimulate individual or organization to expand production under the condition of assured prospective earnings and push forward economic growth. Therefore, system revolution is the determinant factor in economic development performance.(2) Fiscal system revolution is the key to promoting economic growth. Fiscal system transference is a supply-type system transference dominated by government. Through reasonable power allocation between authority and finance, central government confirms the allocation relationship of property ownership and fiscal resources among governments, entrust fiscal organizations of all levels with more powers in disposal, earning and management of fiscal resources. An incentive mechanism with clear prospective earnings is formed to promote economic development performance. Therefore, fiscal system transference is the key to promoting economic development performance.(3) Fiscal system transference is caused by fiscal pressure and fiscal crisis. By analyzing each evolution of our nation’s fiscal system, the author finds out that each phase presents different system models and incentives, but they all revolve around how to effectively solve national fiscal crisis and relieve fiscal pressure. Therefore, fiscal pressure and fiscal crisis are fundamental reasons for fiscal system transference.(4) Fiscal system reform of direct administration between province and counties will undoubtedly lead to administrative system reform. Fiscal system reform of direct administration between province and counties adopts flat management, transforming fiscal management system from four levels to three levels. This will inevitably bring about corresponding reform in administrative management system. Necessary requirements for deepening market economic system reform includes quickening administrative management system reform, pushing forward flat management in administration, reducing government management level, increasing government administration efficiency and decreasing administration operation (transaction) costs.(5) Fiscal system reform of direct administration between province and counties is an improvement of tax distribution system reform. The fiscal management system of tax distribution system preliminarily straightens out allocations relationship of fiscal resources between central and local governments, but the allocation framework among governments under provincial level is not yet complete. Based on international experience, tax distribution system usually divides authority and responsibility among three-level governments. Therefore, it is deepening and improvement of tax distribution system reform to treat "province administrating counties" as an entry point and stimulate fiscal flattening reform by reducing management levels.(6) Fiscal system reform of direct administration between province and counties greatly improves the coordinated urban and rural development capacity. Fiscal system reform of direct administration between province and counties allows county-level governments to effectively allocate and rationally utilize all sorts of public resources and expand fiscal investment in rural infrastructure construction, leading to quickened economic development in county regions, improved living standards of farmers and strengthened coordination ability of county-level governments.(7) Sichuan Province has obtained obvious achievements in implementing fiscal system reform of direct administration between province and counties. Generally speaking, the reform in Sichuan Province obviously quickens the economic development in pilot counties (cities) which show good signs of fast economic growth, boosted demand-driven increase and higher operational quality. Jianyang County, a resource-deficient hill-type county, has yielded good results through pilot reform, which is enough to prove the role this reform plays in pushing forward economic development among county regions.As we give positive remarks to the achievements of fiscal system reform of direct administration between province and counties, we must be aware of contradictions and problems existing in reform. Fiscal system reform of direct administration between province and counties is a process of eliminating the already-existing system and producing a new system. During the transformation of original two-level management between province and cities, city and counties to direct administration of province and counties, a series of conflicts and problems will inevitably appear. To guarantee good and fast economic growth in county regions, the government has to strengthen theoretical research and practical guidance about fiscal system reform of direct administration between province and counties, resolve problems and conflicts in the process of reform, and unleash the driving force of system revolution on economic development performance...