Asia New Vision Forum: Local Financial Autonomy Should Be Backed by Clearly Defined Responsibilities, Former Finance Minister Says
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China’s reform plan to enhance local financial autonomy should not be narrowly interpreted as simply increasing the share of local fiscal revenue, former Finance Minister Lou Jiwei said at Caixin's Asia New Vision Forum 2024 in Singapore this week.
A reform blueprint released after the Third Plenary Session of the 20th Central Committee of the Communist Party in July included commitments to “establish a balanced relationship between central and local finances, emphasizing clear responsibilities and coordinated financial resources.” The document proposed to “enhance local fiscal autonomy,” generating significant attention and speculation regarding its implications for the fiscal relationship between central and local governments.
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- The reform plan addresses balancing central and local financial responsibilities, enhancing local fiscal autonomy without simply increasing local revenue shares.
- Key concerns involve clarifying financial duties, ensuring central government boosts tax revenues, and managing resources to support local governments affected by aging populations and pandemic impacts.
- Solutions propose reducing unnecessary expenditures, improving financial coordination, and potentially raising deficit spending to restore economic confidence and stimulate investment.
- 2016 to 2023：
- China's tax-to-GDP ratio dropped from 17.5% to 14.3%, and total fiscal revenue fell from 28.1% to 22.1%.
- In 2023：
- The national general public budget revenue was split with 46% for the central government and 54% for local governments, while central fiscal funds accounted for less than 40% of total national fiscal revenue.
- July 2024：
- The Third Plenary Session of the 20th Central Committee of the Communist Party took place, during which a reform blueprint was released.
- This week：
- Former Finance Minister Lou Jiwei spoke at Caixin's Asia New Vision Forum 2024 in Singapore.
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