Caixin
Sep 02, 2013 05:09 PM

Defining the Powers of Central and Local Gov'ts

Ballooning local government debt is a major worry of the country's economic regulators. There are many reasons for the gigantic size of debts, but one important cause is that local governments have too much to do but too little in their coffers; the financial resources in their hands hardly matches their responsibilities.

From a legal perspective, there is a systematic flaw behind the mismatch: the division of labor between the central and local governments has never been spelled out by law. A number of administrative regulations were made in this regard, but they remain vague, unstable and sometimes just verbal decrees. And there have been times that new policies trumped existing regulations. The lack of a legal footing sowed the seeds of a series of institutional problems regarding this division; uncertainty regarding policy changes brews social risks.

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