edited by Elena Vallino, Università di Torino e OEET
INTRODUCTION
Elena Vallino
This issue of the Newsletter “Emerging Economies” is composed by essays extracted from the book “Fiscal underpinnings for sustainable development in China” edited by E. Ahmad, M. Niu, and K. Xiao (2018, Springer Singapore). The book collects chapters on issues related to a possible path of sustainable development in China, with a focus on the Guangdong Province. This province hosted core Chinese economic reforms since the beginning of the Responsibility System in the 1970s, being therefore a good representation of the challenges of the whole nation. The main concept emerging from the book is the strong need for rebalancing economic growth towards a more inclusive and sustainable path. Fiscal and tax reforms are investigated as main instruments for the accomplishment of the required changes.
Ehtisham Ahmad provides a synthetic and informative historical overview of the Chinese governance models, focusing on the important shift of the early 1990s, when for the first time the tax administration authority moved from the local provinces to the center. On the one hand the creation of a centralized and modern fiscal institution contradicted the “normative” prescription of that period; on the other hand China managed to reach an impressive economic growth, the development of coastal regions and a massive reduction in poverty. However, the profound social, economic and institutional changes led to the emergence of new challenges that need to be urgently addressed: new relations between the provinces and the center in term of resource distribution and risk transmission; rising economic and geographical inequality; rent-seeking behaviours; obscure phenomena like hidden borrowing; dramatic rise of environmental pollution. The article provides some suggestion to address these risks.
Xubei Luo and Nong Zhu write about the Guangdong Province, addressing its hub-periphery development pattern that reflects the wider development of the whole nation. They suggest four elements that should be present in a path for an inclusive and sustainable growth: the support of a favorable environment for the private business; incentives for the development of comparative advantages; investments in skilled labour force; protection of the vulnerable side of the society.
Gisela Färber and Zhijie Wang provide an interesting comparison between China and Germany with respect to subnational public debt. This issue generates similar contradictions in both countries: disequilibrium in intergovernmental fiscal relations, low revenues al local level, and imperfect information about actual liabilities and debt levels. Although some positive trends of the global economy contributed to the stabilization of local governments’ revenues, in both countries at the subnational level we observe the problem of a consistent commitment for unfounded mandates and an insufficient own tax revenues. This condition has consequences on the financing of the decentralized tasks like internal security, education and infrastructure development.
Kezhou Xiao and Yuan Xinghou address the issue of accountability of public spending in countries without electoral competition. In order to ensure that public spending and investments in infrastructure meet the preferences of the population, China experimented social audits that focus both on social costs and benefits as well as user responses. In the Guangzhou Province this approach has been applied to a proposal to extend the Bus Rapid Transport System (GBRT). Although this project had achieved high international recognition and was copied elsewhere, the city government performed a social audit that produced a negative response, and provided therefore a strong basis to reject its expansion. The mechanism could be of interest of a large number of countries with different governance models.
