Economic Liberalization Of China 's Fiscal System

1379 WordsApr 10, 20176 Pages
During its economic liberalization in the late 1990s, China restructured its fiscal system, shifting the civic spending burden from the central government to provincial authorities. By 2015, 85 percent of national expenditures occurred at the local level. As China’s economic emergence sped modernization, the central government asked provincial leaders to grow their localities, maintain social stability, and provide for workers, all while taking on the spending onus themselves. This implausible list of demands forced local leaders to choose between emphasizing rapid growth through business investment or growing at a pace that did not leave any citizens behind. The subject of The Transition Period, Gushi County Party Secretary Guo Yongchang,…show more content…
Local government debts amounted to $3.1 trillion in 2013, “more than a third of the size of the entire economy.” This increased spending created a positive feedback loop by pitting local officials against each other: Municipalities sought to outspend their neighbors, willingly accruing debt in order to compete in the modernization race. This system clearly influenced Guo’s Gushi where “working hard to develop and catch up” is the goal. While elements of this system are problematic, spending on development is positive on the whole. Due to development, “sleepy rural towns” have “transformed into major cities,” leading to a “growing Chinese middle class” of white-collar urban workers. Although economic growth has widened income inequality, it has “raised the living standards of most of the population dramatically” and lifted more than 500 million Chinese citizens out of poverty. Additionally, some economists believe that development may lead to equality in the long term. They propose that China’s development follows a Kuznets curve whereby “growth results in relatively more inequality in the initial stages of economic development, and greater equality at advanced stages.” Accordingly, Guo is not purely seeking personal renown in promoting development, but following an economic plan with the potential to help all sects of society in the long term. While Guo personally boasts “that he constructed
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