Caixin
Feb 09, 2018 06:49 PM
ECONOMY

Central, Local Government Fiscal Duties to Be Better Defined

* National authorities will shoulder 80% of cost of providing some services in 12 inland regions

*Expert at top think tank says move will produce positive results in underdeveloped regions

(Beijing) — China’s cabinet has moved to better define the fiscal responsibilities of the central government and its local counterparts in a bid to improve delivery of basic public services.

The State Council’s reform plan could help clarify which official agencies should guarantee public services, which may help produce positive results in economically underdeveloped regions having fiscal difficulties, said Peter Fang, an expert in social security programs who works at the Chinese Academy of Social Sciences.

The State Council issued guidelines that clearly define the separate fiscal responsibilities of central and local governments, including provincial-level governments, across eight fundamental public service categories, according to a document published on the central government website Thursday. The eight categories contain 18 subcategories.

The eight categories are compulsory education, student grants, employment services, pension insurance, medical insurance, basic living-aid allowance, family planning and affordable housing. The costs of providing services in these sectors will be covered jointly by central and local government coffers as of Jan. 1, 2019, the document said.

Since the 1994 reforms of the fiscal and taxation system, China has gradually formed a mechanism regarding public services in which the central government draws up policies and local governments implement them. In this system, local governments have assumed the lion’s share of the cost of providing some public services due to inconsistent rules regarding shared responsibility. However, financially weak governments subsequently struggled to provide adequate services.

For seven subcategories below the eight larger categories — including student subsidies and allowances for public schools, medical insurance for rural residents, and public health and family planning services — the plan proposes a tiered system in which the split in local-central responsibility is decided based on a region’s economic and social development, the quality of existing public services, and the local government’s fiscal situation.

For example, the central authorities will cover 80% of the cost of these services in areas identified as having greater need of support, including the Inner Mongolia and Guangxi autonomous regions, the Chongqing municipality, and the provinces of Gansu, Yunnan, Sichuan and Guizhou.

By contrast, the national government will pay for only 10% of these services in Beijing and Shanghai, the country’s richest cities. Shanghai posted a 7% gross domestic product (GDP) growth rate in 2017, 0.1 percentage point higher than the national rate, while Beijing was only 0.2 percentage points behind the China headline GDP growth figure. In Inner Mongolia and Gansu, the growth rate in 2017 was less than 4%.

Contact reporter Pan Che (chepan@caixin.com)

You've accessed an article available only to subscribers
VIEW OPTIONS
Share this article
Open WeChat and scan the QR code
GALLERY
Copyright © 2019 Caixin Global Limited. All Rights Reserved.