Asia Institute - Research Publications
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ItemUsing the Government Financial Reporting Framework to Redraw the State and Market Boundary in China: A Two-Step Approach(The World Bank, 2018)After four decades of remarkable economic achievement under market reforms, the leadership has called for a reset in the boundary between the State and the Market as an important corrective to help China sustain rapid economic growth, by imposing hard budget constraints on government and insulating SOEs from local government predation. This could start with revealing and reviewing the current operation and finance of the government through the new Government financial reporting framework (GFRS). The sheer size of SOEs and their engagement in provision and finance of public goods and services poses great challenge for China to immediately adopt international standard for GFRS. Given their huge size and diverse characteristics, it is neither correct nor practical to include all SOEs in the public sector. We therefore proposed a two-step approach for using the GFRS to redraw the boundary of the state and market. The first step is to adopt an accounting framework that aims to provide a comprehensive count of government operation and finance, focuses on the fiscal impact of entities, and simplifies the reporting requirements for the vast majority of SOEs. The second step is to review the government operation and finance with an economic framework. It is also hoped that the exercise itself will stimulate further reform of SOEs and a rethinking of the division of responsibilities between government and market. While one should not expect to reach a clear and ideal division between the state and market overnight, with successive iterations, the exercise will lead incrementally to greater clarity and improvements, as the process of implementing the GFRS sets off a beneficent cycle for China’s economic transformation to a higher quality and sustainable growth.
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ItemChina: PIM under Reform and Decentralization(World Bank, 2014)China's transition from a planned to a market economy has required a fundamental change in the role of government in economic decisions. Progress in reforming public investment management (PIM) has been uneven, with notable successes alongside glaring weaknesses. This report examines the institutional framework of China's PIM system and its evolution through the transition period, its, efforts at reform, and outcomes. The government s strategy was to reform the existing PIM framework incrementally by decentralizing responsibility to subnational governments (SNGs) and opening up investment to private participation at the margin. The process of decentralization and marketization proceeded much faster than expected in the 1980s and 1990s, when dismantling the planning mechanisms caused a steep decline in government revenues, especially central government revenues. China's transition from a planned to a market economy has required a fundamental change in the role of government in economic decisions. Among the most important are those affecting investment, where reform has seen the Chinese government curtail its role and attempt to shift from directing the overall pattern of investment to ensuring adequate support to economic growth and public services.