A Choice Architecture Perspective on China’s Central-Local Fiscal Arrangement

— Setting Reasonable Restraints of the Fiscal Powers of Chinese Central Government

Rui Guo

Abstract

This paper sets forth a constitutional analysis on the allocation of fiscal powers between the central and local governments, and advocates for reasonable restraints of the central government’s fiscal power. Adopting a “choice architecture” perspective, I argue that the fundamental feature of China’s allocation of fiscal powers is the central government’s dominant influence on the area, amount and means of the local government’s fiscal spending, leading to the difficulty in realizing the central government’s policy goals, in local governments’ deciding their own policy goals, and in maintaining the quality of public service. The “choice architecture” perspective highlights the necessity to subject the central government’s fiscal powers to the constitutional principles on balancing the central-local relationship, which is provided in article 3 of the Chinese Constitution and article 89, 99 and 107 that define the powers and obligations of the National People’s Congress, the People’s Congresses of the local levels, the national government, and the governments of the local level. Based on the constitutional analysis, the reform of the allocation of fiscal powers between the central and local governments should (1) include the National People’s Congress as well as the People’s Congresses of the local levels, and (2) clarify that the judiciary should be in charge of solving potential conflicts related to the the fiscal power allocation.

Key Words：Fiscal Separation of Powers,  Chinese Central-Local Relations, the Project System, the “Controlling Power”Theory, Choice Architecture, Fiscal Powers of Chinese Central Government

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