Interviews
Public finance reforms key to sustain dynamic progress
01 Feb '08
3 min read
As China transformed from plan to market, the separation of enterprise budgets from government budgets and the shift in responsibility for providing social goods from firms and other units to the governments marked a profound shift that was not always smooth.
For example, public spending on health as a percent of GDP and limited social insurance coverage for rural inhabitants and migrants have meant that China's health and social services improved just moderately in the past quarter century. More revenues will be needed to tackle these challenges, as well as an anticipated spike in pension payments as the population ages.
In China, where social security, education, public health, and justice are largely decentralized, intergovernmental relations and fiscal transfers are vital. The authors argue that improving the efficiency of these transfers will require getting more resources to local governments while keeping them accountable to communities.
“A key lesson learned in the fiscal reform process was that a well-developed fiscal system at the sub-provincial level is indispensable,” explains Mr. Lou in the chapter on intergovernmental fiscal relations.
Regarding public services, the authors call for the government to move from being the controller and sole provider to being the architect, coordinator, and quality assuror. The book cautions that expanding and improving China's education, training, and retraining system will entail about 6 to 9 percent of GDP, which is beyond the scope of government finance. Filling that finance gap will require building broad partnerships and multiple pathways to tap different financial sources.
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For example, public spending on health as a percent of GDP and limited social insurance coverage for rural inhabitants and migrants have meant that China's health and social services improved just moderately in the past quarter century. More revenues will be needed to tackle these challenges, as well as an anticipated spike in pension payments as the population ages.
In China, where social security, education, public health, and justice are largely decentralized, intergovernmental relations and fiscal transfers are vital. The authors argue that improving the efficiency of these transfers will require getting more resources to local governments while keeping them accountable to communities.
“A key lesson learned in the fiscal reform process was that a well-developed fiscal system at the sub-provincial level is indispensable,” explains Mr. Lou in the chapter on intergovernmental fiscal relations.
Regarding public services, the authors call for the government to move from being the controller and sole provider to being the architect, coordinator, and quality assuror. The book cautions that expanding and improving China's education, training, and retraining system will entail about 6 to 9 percent of GDP, which is beyond the scope of government finance. Filling that finance gap will require building broad partnerships and multiple pathways to tap different financial sources.
Click here to view more:
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