On Division of Economic Power Between Central and Local Levels

Lou Jiwei

Chinese Economy, 1992, vol. 25, issue 4, 25-34

Abstract: In economics, economic mechanism is synonymous with economic system. The crux is how resources are allocated and how income is distributed. The current so-called deep-level contradiction is precisely the inner contradiction of these two elements. Superficially, they are manifested as troublesome problems of the economic system. First, who holds decision-making power? Second, where does national income go? Central decision-making power is often eroded by lower levels; as the saying goes: "The central levels make decisions; the lower levels make counterdecisions." Local levels feel a lot of central interference; enterprises feel a lot of administrative interference from both the central and local governments, including different kinds of levies. Every level feels a lack of power. Who, then, really holds decision-making power? The proportion of budget revenues in national income has dropped every year. Both the central and local fiscal departments are feeling a crunch, but still expenses borne by enterprises and undertakings are increasing. Employee incomes are increasing, but statistics show that the real annual increase has been only 3 percent, lower than the GNP increase. Every income-receiving department and level feels a shortage of funds. Where, then, has the national income gone? To whom has it been distributed?

Date: 1992
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