Financial Difficulties Of Primary Institutional Issues

There has been a huge success of Tax-sharing Fiscal System reform in1994, the central government’s fiscal position improved markedly and the macro-control capacity got a huge improvement. Slightly inconsistent with this process is the local governments’ financial difficulty has been highlighted. At the beginning of tax-sharing reform, it expressed as the difficulty of running the local government which is caused by the insufficient of financial resources. After more than a decade of reform, this problem has been significantly improved. But with the economic development, the local governments’financial difficulty has showed on its other side which is insufficient provision of basic public services causing by the insufficient of financial resources.Many scholars in China study at the local government financial difficulties put forward some useful insights, some advocates rely on the development of local economy and some advocate a careful division of financial authority and powers some advocate the legalization of the financial system reform, etc. From the perspective of long-term, these measures are feasible. But for now, each implementation of the measures requires a long gradual process.In this paper, the author studied the financial status of the local governments at the beginning, obtained underlying institutional reasons by standard analysis of the financial difficulties, but this paper did not completely put forward solutions to address these issues which will led to the stereotype of the solution of local governments’financial difficulties. So this paper submitted a financial-sharing system to solve the local governments’difficulties after the analysis of the actual situation in Sichuan Province. Financial-sharing system not only can be seen as a tool to solve the local governments’financial difficulties but also expansion of the financial system below the provincial and extension of the tax-sharing system.