China's Trapped Transition_ The Limits of Developmental Autocracy - Minxin Pei [84]
As reflected in the official data, fiscal decentralization has resulted in three profound shifts in the Chinese state’s fiscal activities, and the effects of such shifts have remained only moderately changed even after the recentralization of the fiscal system in 1994.26 First, the overall level of revenue-generation as a share of GDP has declined dramatically (Table 4.3). On paper, total government revenues, including off-budget revenues, fell from 41 percent of GDP in 1978 to about 18 percent of GDP in 2000 (after bottoming out in 1994). Even if we include the government revenues not counted as budget or off-budget revenues (such revenues were estimated to be about 7.5 percent of GDP in 1995), total government revenues at the end of the 1990s would be about 25 percent of GDP, representing a 40 percent decline.27
Table 4.3. Government. Revenues, 1978-2002a
Source: ZGTJNJ 2003,281,288.
Second, there has also been a dramatic shift in the relative share of the total revenues collected by the Chinese state. Official data on expenditures are a more reliable measurement of the state’s fiscal capacity because a large portion of the central government’s revenues was counted as local revenues prior to 1994 when such revenues were first collected by local governments and turned over to Beijing. These data document a spectacular relative decline of the central government’s fiscal capacity over the last two decades. The central government’s share of total public outlays fell from 47.4 percent in 1978 to 34.7 percent in 2000, while local governments’ share rose from about 52.6 percent to 65.3 percent in the same period .28
Third, Chinese public finance—from the center to the provinces—has been completely transformed by the rapid growth of off-budget revenues (Table 4.3). Historically, off budget revenues accounted for a relatively small portion of total government revenues. In the 1950s, for example, they were about 10 percent of budgetary revenues. In the 1960s and 1970s, they varied between 20 to 30 percent of budgetary revenues.29 Through the 1980s and before the central government reclassified off-budget revenues in 1993 (by counting off-budget revenues as budget revenues), off-budget revenues exploded. At their peak in the early 1990s, they practically equaled budget revenues.30
The explosive growth of off-budget revenues per se should not be treated as the denning characteristic of decentralized predation. Rather, it is a symptom of a dysfunctional fiscal system. What makes the Chinese situation unique and more relevant to understanding decentralized predation, however, is the local governments’ large share of off-budget revenues, as well as their growing dependence on and discretionary use of these revenues. Data on off-budget revenue collection indicate that more than half of the off-budget revenues (55-66 percent) went to local governments prior to 1992, when reclassification of revenue categories occurred. Under the new classification scheme adopted in 1993, nearly all off-budget revenues (75-95 percent) went into the coffers of local governments during the period of 1994-2002.31 According to the data released by the central government for 1996 and 1997, almost all (85 percent) off-budget revenues were “income collected by administrative agencies.” The share of local administrative agencies was 83 percent in this period. Thus, in the late 1990s, off-budget revenues were primarily administrative fees and levies collected by local government agencies.32
Off budget revenues have become a preferred form of predation for two important reasons: discretion and opacity. Generally, off-budget and off-off-budget revenues were collected and spent at the discretion of local authorities with no central supervision. The absence of political constraints contributed to the rapacity and abusiveness with which