The political capacity of Beijing still matters: Political leadership and institutionalization of fiscal systems during the period of economic decentralization in China, 1979--1997

This dissertation seeks to understand the driving forces behind fiscal reforms in China in the 1980s and 1990s as well as the specific conditions that shaped reform outcomes. It integrates policy process (including but not limited to elite politics), institution building, and policy substance in three major fiscal reforms: the replacement of profit by tax reform of 1983–1985, the fiscal contract system of 1988, and the tax-sharing system of 1994.; After examining the three fiscal reforms, this study concludes that fiscal figures alone cannot satisfactorily explain why Beijing and the localities behaved as they did in the fiscal arena. Beijing's policy priorities, which were shaped according to the democratic centralism decision-making norm, mattered. External factors such as changing economic and security environments influenced evolving policy priorities. Greater consensus among leaders and policies that were locality-friendly guaranteed better outcomes in implementation.; The decision-making norm of democratic centralism in an authoritarian system in the process of carrying out major reforms ensured enforcement of Beijing's policy priorities as the collective intention of the leadership. This political mechanism allowed room for all major kinds of reform and institutional building in a series of consultations, negotiations, and compromises among interested parties. As a result, the Chinese policy-making process was time- and energy-consuming, and the resulting fiscal reforms appeared rather non-linear, gradual, and eclectic. This democratic centralism, however, facilitated Beijing's achievement of political stability and effective implementation in the fiscal arena, even though the norm was not designed for efficient policy-making and quick implementation. Chinese elite politics can largely be explained within that norm during the post-Mao period.