Financial Relationship between Chinese Central and Local Governments after Reform and Open-door Policy

Abstract

The economic achievements that China has made in recent years recognise the contributions of its financial reform. The adjustments of the financial relationship between the central and local governments at the provincial level were appropriate with the economic development’s new requirements, ensuring the nature of political centralisation, and partly showing the mind-set of country management throughout the Chinese history. Recent reforms in financial relationship between central and local government of China see the political centralisation maintenance and promoting pilot empowerment in local financial sectors, building theoretical system of central-local financial relationship with Chinese characteristics that lead to the reform of financial transfer regime, tax expropriation regime. This article aims to identify the division of responsibilities and interests between the central and local governments in China and its implications, as well as several Chinese policies to reform and develop the financial relationship between central and local governments at the provincial level.