chapter  11
26 Pages

Poverty reduction, welfare provision and social security challenges in China in the context of fi scal reform and the 12th Five- year Plan

ByEMILE KOK-KHENG YEOH AND SUSIE YIENG-PING LING

Introduction Since the 1994 “tax sharing” reform, while about equal shares have been generally observed in terms of total volume of government revenue at the level of the central government and that of the local provincial governments, the comparison between revenues and expenditures shows that practically every local provincial government annually had registered a budget defi cit in relation to the central government’s budget surplus (Gao, 2007: 188-189). The extent of the defi cit has been huge, especially in those local governments in the western part of the country, and this has greatly constrained local governments’ ability to take care of anything in excess of their very basic fi scal expenditure responsibilities, hence making the central government obliged to take up social welfare responsibilities even at the local level, especially health care (Gao, 2007). Going back to the details of “tax sharing”, the fi scal reform in 1994, at least in the short term, has been seen to result in centralisation or recentralisation after the large extent of decentralisation during the earlier reform period. As a result, the Chinese central state’s fi scal power has been greatly strengthened in relation to local government ( difang ) in terms of the division of taxes. “Tax sharing” ( fenshuizhi ) divided the taxes into the central taxes, local taxes and shared taxes. This chapter critically examines poverty reduction, welfare provision and social security challenges in china against the policy context of fi nical reform after the 12th Five-year Plan.