Straighten Up and Fly Right
开篇：润墨网以专业的文秘视角，为您筛选了一篇Straighten Up and Fly Right范文，如需获取更多写作素材，在线客服老师一对一协助。欢迎您的阅读与分享！
Since 2008, economic policymakers worldwide have variously proclaimed austerity and expansion as the key to boosting investment in the real economy. Not long ago, China had the means to stick to the latter. Recently, its local governments, the focus of current efforts to stimulate growth, are expected to do both.
These governments have just received approval for at least US$300 billion of megainvestment over the past few months. They have declared plans to spend some US$1.6 trillion in the next few years, covering nearly every industry imaginable, from old favorites like road construction to new ventures like cloud computing.
However, in reality, local governments are already in debt by just as much as they stand to receive, a stubborn hangover from the previous investment frenzy orchestrated by the central government in 2008. They have a stack of bills to pay, particularly for public services and operational costs. Given the recent slowdown in the growth of China’s fiscal revenue, the Ministry of Finance has warned local governments to prepare for spending cuts.
Meanwhile, cases of profligacy still abound. The latest round of public outrage came at the news that students in an impoverished city in Hubei Province had to carry desks and chairs to school, while government offices described as “magnificent as the White House”stand in the city center. Similar reports have repeatedly riled the public over the years.
The tricky question is whether Chinese local governments are really short of money, or are simply misusing what they have. The answer may well be both.
Crybabies
Under the current fiscal system enacted in 1994, the central government takes the lion’s share of all major tax revenue, including valueadded tax, consumption taxes and corporate income taxes. According to figures from the Ministry of Finance, the central government holds 61 percent of the national tax revenue.
While tax revenue is increasingly centralized, responsibilities are devolving. “Local government revenue…is not commensurate with local government expenditure responsibilities,”says the China 2030 report issued by the World Bank and the Chinese State Council. “The situation at the county level, the bottom of the fiscal hierarchy, is particularly facing mounting pressure to provide public services like pensions, health care and compulsory education,” said Professor Wang Yongjun, an expert in public finance with the Central University of Finance and Economics.
For years, local governments have concentrated more on paying their staff’s salaries than they have on providing public services or boosting the economy. A city official in comparatively undeveloped Gansu Province, who requested to remain anonymous, told NewsChina that it was not until 2002 that all their civil servants began to receive their full salaries on time. According to the Ministry of Finance, even by the end of 2009, more than one-third of some 2000 counties could hardly afford their daily operation. By 2011, this number had been reduced to 5 percent.
The improvement was thanks in large part to a redistribution mechanism by which the central government transfers a portion of revenue to local governments. The goals are to ease the local governments’ fiscal burden in absolute terms, and in relative terms, to reduce fiscal imbalances between different regions. This has seen moderate success. Central finance has funded 40 to 50 percent of the expenditure of local governments, says the World Bank report
A large part of revenue transfer is earmarked on a project basis. Besides money, projects mean the possibility of high returns in the future. To get hold of these projects, local governments have to lobby ministers in the State Council, which is both expensive and time-consuming. Occupancy rates of hotels around the National Development and Reform Commission(NDRC), for example, are even regarded as a fairly reliable indicator for China’s economy. Those with particularly good lobbying skills, or who are well-connected with the right ministries, have the best chance of getting their hands on development cash. Analysts often say that when it comes to local governments, “the babies who cry the loudest get fed.”
Local governments also have to co-fund their projects. The more you want, the more you have to stump up. Consequently, some poor areas have ended up shredding their books, or giving up. “It is difficult for poor areas to decide whether to go ahead with these projects or not,”said the official in Gansu.
Off the Book, Off the Hook
Recently, several corruption cases have been exposed when officials were spotted wearing expensive belts and watches in public. Flimsy infrastructure, murky administrative accounts and the luxurious lifestyles of those in charge have caused widespread public discontent. Two major reasons can help explain this paradox between local fiscal difficulty and spendthrift officials.
Firstly, non-tax revenue, largely off-budget, provides extra fiscal resources. It accounts for about 40 percent of local fiscal revenue, according to Professor Wang, and is growing fast. For the first eight months of 2012, central non-tax revenue posted nearly zero growth due to the economic slowdown, while local non-tax revenue soared 26 percent.
Land and property are the two most important cash cows, since they are almost entirely under the thumbs of local governments, both on and off-budget. 38 percent of the total direct local government debts of US$1 trillion will be repaid by land sales. Land is often used as collateral for special purpose vehicles established by local governments to finance their investment projects. Corruption and abuses of power in land sales and acquisitions bring in illegal revenue.
Numerous other revenue sources, legal or il- legal, have been created. Zhou Dewen, chairman of the Wenzhou SME Development Association, told NewsChina that the more than 70 fees charged by 39 separate government agencies are a heavy burden for enterprises. Many law enforcement agencies, including the police, abuse their power to impose fines. It is difficult even to identify all off-budget funds. They are a “black hole,” Professor Li Shuguang at China University of Political Science and Law told NewsChina.
Secondly, fiscal discipline is weak. Under increasing pressure from the public, ministries and some local governments have begun to disclose their expenditure on trips abroad, cars and catering. “This is progress, but these details are insufficient for the public to judge whether the spending is reasonable or not,” Professor Li said.
From 2011 onwards, all off-budget funds have been included on-budget, making the collection and use of all government revenue and expenditure subject to the scrutiny of legislators. This is not as big of an improvement as it would appear. Hearings, inquiries and debates, procedures Professor Wang describes as “crucial for any budget making,” are still absent from the existing Budget Law and the recently released draft revision. Besides, a law without specific penalties makes no sense, argued Professor Li.
There is consensus that both autonomy and discipline need to be increased when dealing with local public finances. Analysts are divided on methodology. For example, should local governments be allowed to issue bonds? How should administrative responsibilities be shared more specifically and reasonably among the bureaucracy?
These questions used to be considered highly technical issues the reserve of experts. But the draft revision of the Budget Law has elicited more public feedback than any other law on which public opinion has been solicited. Public awareness is the only real ray of light shining into the muddy waters of local government finance.