THE REFORM OF THE FISCAL TRANSFER SYSTEM
Reform of the system of transfers between different levels of government in China was a crucial element of the wide-ranging fiscal reforms initiated in 1994. One object of the reforms was to replace the ad hoc contracting arrangements that had characterized Chinese public finances for most of the preceding decade. Another object, of course, was to consolidate the benefits of the growth that had been achieved by the special treatment of the coastal provinces. A more balanced approach to regional growth is expected to lead to a broader geographic distribution of the benefits of growth, and transfer mechanisms should playa greater role in accomplishing this redistribution than they did in the past.