In This Article Expand or collapse the "in this article" section Budgets and Government Revenues

  • Introduction
  • China’s Tax-For-Fee Reform
  • Final Discussion

Chinese Studies Budgets and Government Revenues
Guiying Laura Wu
  • LAST MODIFIED: 26 September 2022
  • DOI: 10.1093/obo/9780199920082-0200


This paper provides a bibliography for China’s budgets and government revenues in chronological order. First, the author presents a brief introduction on China’s fiscal system before 1978. In the planned economy era, the government controlled the economy through the executive order. The tax system played a relatively less important role. The second topic is about the fiscal decentralization and government expenditures. During 1980–1993, the fiscal contracting system was implemented. Since 1994 the tax-sharing system has been adopted. Both these reforms are a process of fiscal decentralization. At the same time, the central government still has the tight control over the political system. The political-centralization-fiscal-decentralization system plays a key role in promoting economic growth. It also has important implications for public service, government size, and fiscal expenditure efficiency. The direct consequence of the 1994 tax-sharing system is that local governments have less revenue but still have to support most of the cost of public services, including the productive infrastructure investment. Then the local governments turned to the land finance model. This will be discussed as the third topic. The fourth topic is on local government debt. After the 2008 global financial crisis, to mitigate the impact of the crisis in the Chinese economy, the Chinese government introduced a 4 trillion RMB (renminbi) economic stimulus plan in 2009. Among the four trillion yuan—the yuan is the basic unit of the renminbi—the local government is responsible for raising three trillion. Even land finance itself could not afford it. The central government allows the local governments to lend funds through local government financing platforms after the Ministry of Finance and the People’s Bank of China makes policy changes. This action has an important effect on the local government debt and the stability of China’s financial system. The last topic is about the tax-for-fee reform for rural citizens. Finally, there is a brief discussion of some other topics that do not fall into these categories but are interesting enough to cover under the theme.

Planned Economy Era

During 1949–1978 period, the priority of the Chinese central government was to develop the heavy and military industries, while China was labor-intensive at that time. Lin 2014 shows how to model the fiscal system under the planned economy to collect resources to develop heavy industry. Naughton 1996 investigates the industry sector. Wong 1992 focused on the main industry tax types. Oksenberg and Tong 1991 describes the changes in Central–Provincial fiscal relations. Xie 2009 provides a more general picture, though from the government perspective.

  • Lin Yifu 林毅夫. Jiedu Zhongguo jingji (解读中国经济). Beijing: Beijing Chubanshe, 2014.

    Lin provides an economic explanation of how to support the heavy-industry-priority strategy through the planned economy. Lin emphasizes that the free-market economy cannot support heavy-industry-priority strategy. The Soviet Union–type command economy was adopted. In the industry sector, firms were entitled monopoly positions, while the price of all the factor inputs, including the price of raw materials, labor wage, and interest were artificially depressed.

  • Naughton, Barry. Growing Out of the Plan: Chinese Economic Reform, 1978–1993. Cambridge, UK: Cambridge University Press, 1996.

    The monopoly market structure is emphasized. Naughton finds that the markup of industrial products was high. Then the profit level would be higher. The government took away all the residual in the form of tax and profit.

  • Oksenberg, Michel, and James Tong. “The Evolution of Central–Provincial Fiscal Relations in China, 1971–1984 the Formal System.” The China Quarterly 125 (1991): 1–32.

    DOI: 10.1017/S0305741000030289

    Oksenberg and Tong provide a good summary of Central–Provincial fiscal relations in China. According to their study, sharing total revenue method was often adopted, such as in 1959–1967, 1969–1970, and 1976–1978. Dividing revenue method was implemented in 1950–1958. Lump-sum transfer method was used in 1971–1973, while decoupling expenditure from revenue method was used in 1974–1975.

  • Wong, Christine P. W. “Fiscal Reform and Local Industrialization: The Problematic Sequencing of Reform in Post-Mao China.” Modern China 18.2 (1992): 197–226.

    DOI: 10.1177/009770049201800204

    According to Wong, taxes on industry consisted of only two main types by the early 1970s: industrial-commercial taxes levied on producers at turnover and income taxes on non-state enterprises.

  • Xie Xuren 谢旭人. Zhongguo caizheng liushinian (中国财政 60 年). Beijing: Jingji Kexue Chubanshe, 2009.

    This book provides a detailed review of the fiscal system over the last sixty years. Xie points out that the share of tax from state-run and collective firms accounted for 45.9 percent among all the fiscal revenue during 1956–1978, while the enterprises’ profit accounts for 52.8 percent (p. 8). The taxes were progressively simplified, as the government controlled the economy mainly through the command structure.

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