Finance and rural governance: centralization and local challenges

AbstractThe ability of local governments to raise revenues has been dramatically altered over the last several decades in rural China, and this has had a significant influence on local governance. The fiscal reforms in 1994 and after 2002 significantly strengthened central government capacity to collect revenues at the provincial, county and township levels. The centralization of tax policies has also fundamentally changed the relationship between central and local administrative levels. This paper examines the cost and benefits of strengthening central government capacity and the increasing reach of the state in rural China. One of the challenges facing local officials is to provide social services and at the same time deal with underfunded mandates from higher authorities. Local officials and villagers have adjusted to changes in finance and tax policies in diverse ways. Moreover, when analyzing fiscal reforms and local governance it is important to take into account the differing perspectives from the village, township, county and center.Keywords: local financetaxationrural governancerural social servicescentralization We would like to acknowledge Kevin O'Brien, Emily Ting Yeh and Saturnino Borras for their insightful comments as well as the Northwest Socioeconomic Development Research Center (NSDRC) in Xian China and the Ford Foundation, Beijing, for their support.Notes1This refers to Shue (Citation1988) and the ability of the central government to influence local officials. Also see Oi et al. (Citation2012) for a similar discussion2Leading cadres are the official leaders at each administrative level. They are either the mayor (government head), vice mayor, party secretary or vice party secretary. Unlike civil servants, leading cadres are transferred every three or four years and they are subject to strict promotion standards from the administrative level above (see Edin Citation2003).Additional informationJohn James Kennedy received his PhD at the University of California, Davis in 2002. He is an associate professor in the department of political science at the University of Kansas (KU), and director of the Center for Global and international Studies at KU. He is also affiliated with the Northwest Socio-economic Development Research Center (NSDRC) at Northwest University, Xian. His research is on rural social and economic development and topics include local elections, tax and fee reform, rural education and the cadre management system. He is currently examining local government evaluation of public services and specific health care issues. He has published articles in The China Quarterly, the Journal of Contemporary China, Asian Survey, the Journal of Chinese Political Science, Asian Politics and Policy, Whitehead Journal of Diplomacy and International Relations and Political Studies.