©2018 Institute of World Economics and Politics, Chinese Academy of Social Sciences
China & World Economy / 94–106, Vol. 26, No. 2, 2018
China’s 40 Years of Fiscal and Tax Reform:
A Basic Trajectory
The present paper describes the trajectory of China’s fiscal and tax reform in the
past 40 years, which can be summarized in five phases. The reform commenced with
“decentralizing power and transferring benefits.” Then, under great fiscal pressure,
institutional reform was instigated, which aimed to establish a new scal and tax system.
To regulate the government revenue and expenditure beyond the fiscal and tax system,
reforms were put in place to build an institutional framework for public nance. As the
scal and tax reform had gradually entered the more sophisticated phases, China took a
series of measures to further improve the public nance system. Since 2012, based on the
overall plan of comprehensively deepening reform, China has embarked on establishing
a modern public nance system. The present paper characterizes China’s scal and tax
reform as gradually moving toward a system that aligns with the overall reform and
complements the goal of marketization and modernization of state governance.
Key words: China, scal and tax reform, public nance
JEL codes: H70, O53, P30
Forty years have passed since China started its scal and tax reform, which has closely
accompanied the steps of the country’s overall reform and opening up. The complexity of
the problems, the tortuousness of the road, the gravity of the mission, the profoundness of
the changes, and the greatness of the accomplishments involved in China’s scal and tax
reform have rarely been seen in global history. It is of great importance to systematically
summarize the practices of China’s reform and opening up, including its scal and tax
reform, by highlighting the right moves it has taken and clarifying the basic trajectory,
in order to relay China’s economic stories. Furthermore, the generalization is, in itself, a
theoretical innovation and contributes to economic theory.
Based on reform targets in different periods, the process of China’s scal and tax
*Peiyong Gao, Senior Fellow, Institute of Economics, Chinese Academy of Social Sciences, China.