Social Sciences in China (Chinese Edition)

No. 4, 2022

A Fiscal Incentive System with Chinese Characteristics: A Perspective Based on a Unified Market

(Abstract)

Lü Bingyang and He Ying

The successive changes in the Chinese fiscal system changes have focused on giving full play to both central and local initiative. In the course of empowering and controlling local finance, the central government has always been in the dominant position, adapting to the times and local conditions and seeking the best way to deal with the contradiction between building a unified market and motivating local governments. This has given rise to a fiscal incentive system with Chinese characteristics: guided by the principle of “unified leadership and decentralized management,” the central government has on the one hand given local governments the fiscal power to mobilize local initiatives for economic development and on the other has promoted the construction of a unified market on a wider scale through the adjustment of intergovernmental affairs, taxation reform, non-tax revenue management reform, infrastructure construction and the centralization of affairs in the transport and communications sectors, so as to alleviate the problem of market fragmentation arising from local initiatives. The combined efforts of the central and local governments mean that the contradiction between establishing a unified, open and competitive market system and mobilizing local initiative has been successfully resolved, effectively promoting China’s economic growth.