1 Local Public Finance in China: Expenditure Responsibilities of Local Governments

Expenditure responsibilities in China are highly decentralized. The Budget Law confers substantial autonomy to each level of sub-national government and quite broad expenditure responsibilities. However, expenditure assignments are far from being transparent and clear, mostly because of the presence of extensive concurrent expenditure responsibilities among different levels of government. This overwhelming presence of concurrent responsibilities can be traced back to the planned economy era when it was not considered necessary to separate the responsibilities of different spheres of government as providers of public services (local governments acted as agents of the central government- only carrying out assigned tasks), nor was it considered necessary to separate the expenditure responsibilities of governments from those of SOEs. The latter was due to the cohesive functions of the government in both the public and private sectors; in fact, fiscal expenditures and the expenses of the SOEs were jointly determined by government before middle of 1980s. Extensive government responsibilities: differentiating between private and public sector activitie