Local Government Organization and Finance: China
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and firing of public service unit employees are determined by the units themselves. Currently, the degree of autonomy and flexibility in the exercise of executive powers by local governments is high in most jurisdictions, because the party committees of higher-level governments often delegate significant authority to local party leaders. However, the degree of autonomy and flexibility is very unstable and inconsistent across time and across jurisdictions, because this delegation is not formally defined and is at the discretion of the party leaders of the higher-level government.
An Impressionistic View of Local Government Finances in China The current system of local government organization and finance in China has some positive features. Local governments assume a predominant role in the delivery of public services. In this role, they are guided primarily by national mandates, yet they have significant opportunity to adapt and innovate to meet local circumstances. They have done a phenomenal job in alleviating poverty. They have also been successful in improving infrastructural deficiencies. Good-quality infrastructure is, afterall, seen as an important inducement to investors to pump capital into their jurisdictions. New investment enables local governments to enlarge their tax bases and local leadership to assume greater political clout. These benefits provide strong incentives for local governments to focus on local economic development policies. They also stimulate a great spirit of competition to uplift local economies. The local governments in China, nevertheless, suffer from a number of shortcomings. These include lack of clarity in their roles, weak fiscal autonomy, poorly structured system of fiscal transfers, lack of incentives for responsive and accountable delivery of public services, and perverse incentives to focus on private goods, at the expense of essential social services. China follows a layer cake, or top-down, model of accountability for various levels of government. In this model, policy determination is mostly at the center, and responsibility for service delivery is at the county level and below. The intermediate tiers/orders simply ensure compliance with higherlevel mandates. The efficient working of such a system requires significant clarity in roles, responsibilities, and accountabilities. However, clarity in roles is currently lacking to allow greater flexibility for local-level governments. This works to the detriment of responsive and accountable local governance.
