Fiscal Decentralization and Growing Regional Disparities in Rural China: Some Evidence in the Provision of Social Services

This paper provides evidence of inter-regional and inter-sectoral inequality in China by comparing local government provision of social services. An examination of a number of education and health status indicators reveals large disparities in the level and quality of service provision across regions, with service provision in poorer regions falling far short of targets enunciated in state policy. Fiscal centralization has weakened the capacity of government to effect equalization across regions. As the fiscal system moved towards self-financing, fiscal pressures particularly intensified for the county level, whose expenditure burdens have generally been increasing. With higher level governments themselves under severe fiscal strain and in no position to subsidize services, rural governments are forced to seek supplementary funding off budget, by imposing a variety of fees and levies. In poor regions, however, access to off-budget resources is limited, resulting in lower levels of service provided and amplification of regional inequalities. Copyright 1995 by Oxford University Press.