Target Selection, Government Transfer Payments

The prevailing opinion on the aim of the intergovernmentat transfer system is to solve the finance unbalance among local governments. According to this theory, the dominant capital should be alloted to the impoverished regions. But under the main leading policy of Deng Xiaoping(exploiting the west part after the east) dated from the 80's of the 20 century, which are achieved greatly, the east part of China is exploited successfully depending on the intergovernmentat transfer system. And this proved that the financial appropriation should be varified under the different period and the macro economic environment. The vivid facts attract the author to reconsiderate the aims of the intergovernmentat transfer system. First, making investigations on the traditional "equalization", The author criticizes the concept that the loss of social welfare and material allocation is the certain result of the finance unbalance among local governments, considers with strong proof that the loss of the production, the slow economic growth and the real enhance is under the potential of the social welfare are led by the continuous chase after "equalization". Second, offers the concept of "efficiency", considering the way to achieve the aim,stability of the society and improve of social welfare, of the intergovernmentat transfer system lays on using the fiscal capital most efficiently. The reason that the government aims at "efficiency" is the government itself is one of the homo economics, who chases after its own profit and the maximum of the profit, i.e. the stability of the authority, which demands the stability of the society as the first condition. The authority can not be stable with endless changing of governing groups or in an unsettling society. And the second condition is to develop the social welfare only with which will people support the government honestly. Therefore, the government must utilize the means of intergovernmentat transfer system to achieve stability and development. On the base of theory, the author offers the patterns for capital allocation under which analyses practically the present financial allocation system on condition of choosing the per capit GDP and the scale of minority population as the factors of stability, the tribute to the financial center of the country from local governments and the developing degrees of different regions as the factors of development. Comparing with the popular "equalization", the aim of "efficiency" has its own features: whether and when should the fiscal capital concentrate on developed regions or impoverished regions depends on the politic and economic environment. Furthermore, the aim of "equalization" is how to allot the cake, while the aim of "efficiency" is to allot the cake on the base of how to make it bigger.