According to a China Securities Journal article, the unreasonable allocation of revenue between the central and local governments has contributed to social instability. The central government takes the lion’s share of revenue, while smaller shares are allocated to local governments. However, local governments are responsible for expenditures on education, medical care, and retirement. When revenue falls short, two problems arise. One, local governments resort to auctioning land to augment their revenue. This has become the most popular source of income for local governments. Two, the severe lack of adequate funding for housing, education, medical care, and retirement, coupled with insufficient public facilities and services, has directly “impacted the stability and harmony of our society.” In contrast, the central government’s revenue is unusually high, “demonstrating the increase in national power.”
Source: China Securities Journal, October 28, 2010
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