Government finances and public interests: perspectives on state-building

This article discusses the financial behavior of local governments and its political consequences in China. According to surveys conducted from 2006 to 2011, the author points out a trend: local governments have increasing awareness over the control of their ‘financial assets,’ they have increasing motives to pursue rewards, play active roles as investors expanding to broader economic realms, and market principles have been fully legitimized among official institutions and organizations within the system. With the strengthening awareness in the ownership and handling of political assets, the financial capacity of local governments—the ability to allocate resources and the ability to return incentives—have increased, but under the influence of historical perceptions and structure of institutional and regional finances, the local government’s chain of benefits mainly extends along the official system, or its related economic departments. For the society, this encourages and also exacerbates the imbalance of opportunities to receive benefits, and the potential political consequences are damaging to the reputation of the government representing ‘public interests’.