The extent to which localities have power to dispose of income collected in their area is a crucial determinant of centre-province relations. Indeed, for some writers, China’s financial system is the key to understanding the relationship between the centre and the provinces. The central authorities are heavily reliant on funds remitted to them by local authorities. To by-pass the localities and try to collect all finances centrally would place an impossible burden on the central administrative machinery. But it is neither possible nor wise to place an even burden of remittances on all provinces. Some cannot raise sufficient capital to meet the needs of their own area, let alone to remit funds to the central government. Other areas generate sufficient surpluses to remit massive sums to the centre - most notably Shanghai, which has been the single biggest source of provincial remittances to the central authorities since 1949.
KeywordsDirect Foreign Investment Central Government Foreign Investment Central Authority Central Finance
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