How the Chinese Fiscal Decentralization Frustrate Its County Economic Development: A Literature Review

Fiscal decentralization has been considered as one of the essential institutional forces that can improve the quality of public goods and services as well as the allocation efficiency of regional resources in developing countries. However, along with the Chinese economy’s “miracle growth” under the background of fiscal decentralization, the county economic development of China has paid the price. Therefore, this research explores how the Chinese county economy has been frustrated by its own fiscal decentralization system in two ways: The transfer payments and the power allocation among the sub-national governments in China. Especially, this paper focuses on the fiscal system under the provincial level.