| In China, beginning in the late 1970s, the decentralization of powers has played a significant role in the transformation of state structure, and the traditional centralized fiscal system has changed into a decentralized revenues-sharing system. In the decentralized central-local framework, the fiscal capacities of local governments were gradually strengthened. After the reform of "the tax sharing system" in 1994, although the fiscal authority centralized once again after the reform, the local governments had been given some discretion as a part of fiscal autonomy, which covered a variety of issues, such as budget, revenue, and expenditure. Meanwhile, local governments indirectly and legally got independent decision-making powers on the debt financing and the expenditure of public investment by means of the local state-owned enterprise. Local governments also got independent financial powers from the rules behind the convention of the constitution law. However, the role of law as a determinant of economic development has been less often explored. Thus the powerful local political factions were able to adopt financial policies instead of laws, and get under-regulated sources to finance local expenditure needs. In this way, the so-called de facto financial autonomy outside the legal framework is just one of the features of the local autonomy of contemporary China.In order to restrict the abuse of power, the allocation of financial power among national and sub-national governments, as a matter of the rule of law, should accord with a systematical and practical legal system. Further, the reason for the fiscal autonomy is to strengthen local governments' fiscal responsibility. Under the rule of law, as a self-government model that the local politics and administration are determined and executed by the local residents, the resident autonomy is a part of the fiscal autonomy. |
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