Research On Horizontal Transfer Payments System From Perspective Of System Design In Jiangsu Province

Since Reform and Opening-up, the Chinese economy and financial resources have been improving significantly. However, due to the inevitable influence of imbalance recourses, it is not yet well balanced in the development of economy and the financial resources are not yet well coordinated in different regions. Fiscal disparity is also a serious problem that has negative influence on the development in most provinces. Faced with the fiscal gap, the aim of equalization of basic public services would be difficult to achieve. With the investigation and study on the experiences of narrowing the fiscal gap of regions in western countries, it is proved that fiscal transfer payments system is one of the basic and effective means. How to reform and improve the fiscal transfer system is a priority of dealing with the fiscal gap in China. Considering the complexity of the situation of our country, it would be better to discuss the design of horizontal transfer payments system in a typical province. Since the resource conditions of each province is variables, provincial fiscal transfer payments system reform should be an ’adaptation to local condition’ instead of a’one-size-fits-all’.As one of the top provinces which have stronger economy and financial recourses in China, Jiangsu province has typical needs to keep a finance balance between different inner administrative divisions. The fiscal recourses in the north of Jiangsu province are much lower than that in the south, which leads to the non-equalization of basic public services. This article intends to analyze the design of horizontal transfer payments system based on the present situation of Jiangsu province, which has plenty of financial resource while face the problem of fiscal disparity. It is necessary to find a new way of narrowing fiscal gap and reforming transfer payments system in a province.This paper first reviews the researches on finance, fiscal gap and transfer payments system at home and abroad, and then this paper defines the related concepts and explicates the theoretical foundation. With the study based on descriptive statistics, coefficient of variation and Gini coefficient, the measurement result of regional fiscal disparity shows that there is a gap on financial resource per capital in Jiangsu province. Three possible reasons are as follows:economic development, system and institution. And this paper proposes a new method to solve the financial gap to promote balance development. Then with learning from international experiences, horizontal transfer payments system is designed for Jiangsu province and by imitating the system, the effect of narrowing financial gap is positive. This part is innovative.The conclusion is that there is a fiscal gap in Jiangsu province and the horizontal transfer payments system has a positive effect on narrowing fiscal gap. The conditions of the design foundation are as follows:the adequate financial resources, an existence of fiscal gap, the shift in mindset and the supporting system. At last, this paper puts forward policy suggestions for province government, legislation and database creation included. Besides, a special organization and a performance evaluation system are needed.