ABSTRACT
Starting from the late 1970s and early 1980s, China adopted a series of reform measures including the decollectivization of agriculture. At the same time, China started a decentralization process, which gave localities more autonomy. Fiscal reform, literally known as different places “eat at different kitchens” ( fen zao chifan), allowed localities to retain the remainder of their revenues after submitting a fixed quota or certain percentage to the upper levels. This new revenue-sharing contract made it possible for localities to benefit directly from local economic development. Local authorities thus were motivated to actively develop their economies (Oi, 1992).
