## Intergovernmental Fiscal Reform in China

_IMF Working Papers, April 13, 2018_

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**Canonical URL:** [Intergovernmental Fiscal Reform in China](https://www.imf.org/en/publications/wp/issues/2018/04/13/intergovernmental-fiscal-reform-in-china-45743)

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## Bibliographic details
- Authors: Philippe Wingender
- Published: April 13, 2018
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484351109.001

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### Overview and Context
- China is the most decentralized country in the world in terms of expenditures shares, with subnational governments responsible for 85 percent of government spending.
- Limited revenue autonomy and insufficient intergovernmental transfers have led to large unfunded mandates and a build-up of debt outside the budget.
- The government has recently announced an ambitious intergovernmental fiscal reform, which will increase the role of the central government.
- Comprehensive reform is needed to improve public service delivery, increase overall social spending levels and reduce regional disparities.
- Revenue reforms are necessary to improve efficiency and reduce vulnerabilities from excessive subnational borrowing.
- These reforms are challenging, but are crucial so that the government can support China’s continued development and prosperity.

### Key Findings
- Subnational governments account for 85 percent of government spending.
- Current arrangements have produced:
  - Large unfunded mandates.
  - A build-up of debt outside the budget.
  - Insufficient intergovernmental transfers.
  - Limited revenue autonomy at the subnational level.
- Policy objectives of the announced reform include:
  - Increasing the role of the central government.
  - Improving public service delivery.
  - Increasing overall social spending levels.
  - Reducing regional disparities.
  - Improving revenue efficiency and reducing vulnerabilities from excessive subnational borrowing.

### Policy Recommendations and Reform Priorities
- Implement comprehensive intergovernmental fiscal reform to:
  - Rebalance expenditure responsibilities and revenue assignments between central and subnational governments.
  - Strengthen intergovernmental transfers to address unfunded mandates.
  - Enhance revenue autonomy where appropriate to improve efficiency.
  - Contain and reduce off-budget and hidden subnational debt.
  - Raise social spending levels and improve risk pooling to reduce regional disparities.

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## Content in this bundle

- **Intergovernmental Fiscal Reform in China, WP/18/88, April 2018**
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_Source: https://www.imf.org/en/publications/wp/issues/2018/04/13/intergovernmental-fiscal-reform-in-china-45743_