Posted by: mulrickillion | January 20, 2012

Disputes, Untruths and Transfer Payments

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Economic Observer News, Dec 12, 2011 —

Summary: The Economic Observer this autumn ran a series of five articles that examined how China’s tax and fiscal system operates, focusing on how central and local authorities share government revenue.

Our first piece, Cash-starved Local Governments Seek Funds, described the problems facing some provincial officials as they struggle to pay bills while revenue from the real estate sector shrinks. Click here to read the full article

In All Unclear for Pilot Local Government Bond Scheme, we look at how a potential new source of revenue isn’t yet a panacea for cash-strapped local governments. Click here to read the full article

Planners’ Helpful Underestimates examines how local governments can escape the spending edicts of Beijing by submitting revenue and spending forecasts that turn out to be far less than the year-end amounts. Click here to read the full article

Beijing Specifies Use of Local Governments’ Proceeds from Land Sales, describes how the central government is taking a bigger interest in the way that provinces allocate revenue from the sale of long-term land leases, which has been their main source of funding, and hitherto gave them a degree of independence despite Beijing’s growing share of the nation’s tax receipts. Click here to read the full article

The concluding story, Transfer Payments – is the East Paying the West’s Bills? asks whether the prosperous coastal regions get a raw deal from Beijing’s reallocation of fiscal revenues to poorer western provinces. Click here to read the full article

China’s Fiscal System in Figures (for 2010)

21% Government Revenue as a proportion of GDP

8.3 trillion yuan Total Government Revenue

4.24 trillion yuan Central Government Revenue

18% Central Government Revenue Year-on Year Growth

4.06 trillion yuan Local Government Revenue

25% Local Government Revenue Year-on Year Growth

2.9 trillion yuan Total raised from the sale of long-term land lease       (land transfer fees)

1.7-1.2 trillion yuan Local government revenue from land transfer fees after costs, such as compensation for relocated tenants and farmers.

Sources: Finance Ministry, EO Sources (described in the stories above) 

Disputes, Untruths and Transfer Payments – Economic Observer News- China business, politics, law, and social issues

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