Asia Institute - Research Publications
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ItemBold Strategy or Irrational Exuberance: Can China's Fiscal Foundation Support the Belt and Road Initiative?(Stanford University Press, 2020)This chapter examines the economic rationale and finances of the Belt and Road Initiative, a signature program in Xi Jinping's assertive foreign policy that aims to build multidimensional networks linking more than sixty countries and costing trillions of dollars. The BRI was conceived during the decade-long fiscal expansion that began at the turn of the century, and the question is whether it remains affordable under slower growth. At this stage in its development, China must manage the program prudently to avoid saddling banks with bad loans from failed projects. As ever, the decentralized system remains the Achilles' heel, reflected in the gap between official statements of expenditure and figures compiled from bank lending and program announcements. Recent fiscal reforms have strengthened the government's ability to rein in local governments but provide little protection against risks from an overly ambitious foreign policy agenda.
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ItemManaging across levels of government: The challenge of pension reform in China(OECD, 2020)The People’s Republic of China is facing a “population ageing tsunami”, with the share of the population aged over 65 expected to double between 2010 and 2030. Reforming the social security system to improve coverage, sustainability and equity is an urgent task for the government. This chapter examines the workings of the Urban Employee Scheme (UES), the main pension programme currently covering more than 400 million workers and retirees. Although nominally a national programme, the UES is a patchwork of pension pools, managed mostly at the city and county levels. Under fragmented management and weak oversight, the system is rife with underpayment and evasion and has stymied previous efforts by the central government to promote consolidation. This may finally change under top-down reforms implemented since 2013 that have strengthened governance and enforcement capacity. Improving equity and the long-term sustainability of the UES will also require extending coverage to younger migrant workers and strengthening their incentives for participation.
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ItemReforming Public Finance for the New Era(NUS Press, 2022)Fiscal reform was high on the agenda at the outset of Xi Jinping’s administration, when a plan for comprehensive reform of the fiscal system was introduced in 2013 that promised a significant realignment of the central-local relationship as the end goal, to be completed by 2020. Reforms to date have focused on building institutions of financial control but without any significant realignment of revenues or expenditures (Wong 2021). Although intergovernmental reform is said to be continuing and now extends to the subnational levels, this re-iterates past reforms that have to date shown little effect. To restore the vitality of local finance will require a wholesale reform of the intergovernmental system.