The Financial Autonomy of Provincial Governments in Mainland China and Its Effects

Abstract

Since the implementation of the financial responsibility system, mainland China`s local governments have had increased autonomy in economic affairs and tended to produce items that require less investment but can yield faster returns and more tax income. Utilizing resources this way has brought about rapid economic growth; however, it also has had adverse effects on mainland China`s economy. For example, as many places do not want to bring their superior production capabilities into play, production patterns in different areas have remained the same. In addition, there has been imbalanced development between basic industries and processing industries, and a widened gap between rich and poor provinces. Moreover, the economic autonomy of provincial governments has not been guaranteed by law.