A study on “Province Governs County” fiscal administration system reform

As one important linkage of the current reform strategy in China, the fiscal administration system reform that places county finances directly under the management of provincial governments aims to intensify the financial resources of county-level governments and improve the primary-level public service capability. The reform has been in progress nationwide, and has won initial success, but contradictions and disadvantages are also increasingly obvious. At the initial stage of “the Twelfth Five-Year Plan”, the reform shall be done out of multi-dimensional considerations. Otherwise, the reform would have to risk cutting the natural link between cities and counties, and affecting the emerging industrial accumulation and diffusion effect, though it eases fiscal difficulties at the county level to some extent. Because of this, in light of the actual conditions in China, we suggest that we should avoid the “one size fits all” approach, but reform packages shall vary in different regions and conditions to guarantee the maximization of reform benefit.