China (People’s Republic of)

Subnational governments in Asia and the Pacific are key providers of the public services and infrastructure required to achieve the Sustainable Development Goals. Given this role, it is essential that policymakers and development partners understand and support the effective functioning of multi-level governance structures and subnational government finances across the region. This joint OECD-ADB report provides a comprehensive overview of subnational governments across Asia and the Pacific. It covers over 467,000 subnational governments from 26 countries, which represent 53% of the world’s population and 40% of global GDP. On average in 2020, subnational governments in the region accounted for 29% of total public expenditure (8.8% of GDP), 35% of total public revenue (8.5% of GDP) and 38% of public investment (2% of GDP). Harnessing unique data from the 3rd edition of the OECD-UCLG World Observatory on Subnational Government Finance and Investment, the analysis highlights how decentralisation and territorial reforms have reconfigured the structures and finances of subnational governments in the region. It covers a range of topics including fiscal rules, financial management capacity, priority-based budgeting, asset management and the use of public-private partnerships.

This report looks at crucial elements of reforms to growth-friendly recurrent taxes on immovable property. Tax design practices in place in OECD and partner countries are compared and analysed through the lenses of economic theory and empirical analysis. A set of good principles and options for reforming recurrent taxes on immovable property based on the latest experience of property tax reforms around the world are presented that are particularly relevant to the Chinese context, where broader use of recurrent taxes on residential properties is needed to make local public finances more sustainable. Challenges and practices related to the administration of property taxes are explored as well as their interplay with different tax designs. In addition, the main political and administrative hurdles in approving and implementing property tax reforms are discussed, and the approaches commonly employed in successfully dealing with them are examined. Although there are major challenges in designing, reforming and managing a recurrent property tax system, it is possible to overcome these in a manner that allows society to reap benefits in terms of a better allocation of resources, more stable house prices and a fairer income distribution.

Subnational governments’ capacity to effectively fund and deliver public services are crucial for the realisation of the benefits of decentralisation. However, subnational capacities often suffer from significant weaknesses, ranging from inadequate assignments of own-revenues, through to flaws in tax administration, the design of intergovernmental transfers, spending assignments and various aspects of public financial management. The volume discusses how better diagnostics and more strategic reforms can contribute to easing the resource constraints on subnational governments, as well as creating appropriate incentives for these governments to improve performance. The volume includes studies of the enabling conditions for subnational capacity building in Asia, as well as focused studies of China and India's fiscal relations challenges.

The COVID-19 crisis has had a profound impact on SME access to finance. In particular, the sudden drop in revenues created acute liquidity shortages, threatening the survival of many viable businesses. The report documents an increase in demand for bank lending in the first half of 2020, and a steady supply of credit thanks to government interventions. On the other hand, other sources of finance declined, in particular early-stage equity. This paper, a special edition of Financing SMEs and Entrepreneurs, focuses on the impacts of COVID-19 on SME access to finance, along with government policy responses. It reveals that the pre-crisis financing environment was broadly favourable for SMEs and entrepreneurs, who benefited from low interest rates, loose credit standards and an increasingly diverse offer of financing instruments. It documents the unprecedented scope and scale of the policy responses undertaken by governments world-wide, and details their key characteristics, and outlines the principal issues and policy challenges for the next phases of the pandemic, such as the over-indebtedness of SMEs and the need to continue to foster a diverse range of financing instruments for SMEs.

Populations in OECD and emerging economies are ageing rapidly, which will have significant macroeconomic impacts, including on public expenditures and tax revenues. The rules and practices that govern fiscal relations among different levels of government, such as their responsibilities for taxation, spending and debt management, have a bearing on economic efficiency and ultimately growth. The consequences of population ageing at subnational government levels are especially intense. Many local governments are vulnerable to the ageing of their populations from a fiscal perspective. The economic and fiscal challenges of an ageing population go beyond intergovernmental boundaries, and they require complex intergovernmental policy responses. This volume brings together cross-country studies of fiscal policy, demographics and spatial productivity, as well as country studies of Brazil, Canada, China and Germany.

The design of intergovernmental fiscal relations can help to ensure that tax and spending powers are assigned in a way to promote sustainable and inclusive economic growth. Decentralisation can enable sub-central governments to provide better public services for households and firms, while it can also make intergovernmental frameworks more complex, harming equity. The challenges of fiscal federalism are multi-faceted and involve difficult trade-offs. This synthesis paper consolidates much of the OECD’s work on fiscal federalism over the past 15 years, with a particular focus on OECD Economic Surveys. The paper identifies a range of good practices on the design of country policies and institutions related strengthening fiscal capacity delineating responsibilities across evels of government and improving intergovernmental co-ordination.

As the significance of the creative economy continues to grow, important synergies with tourism are emerging, offering considerable potential to grow demand and develop new products, experiences and markets.These new links are driving a shift from conventional models of cultural tourism to new models of creative tourism based on intangible culture and contemporary creativity. This report examines the growing relationship between the tourism and creative sectors to guide the development of effective policies in this area. Drawing on recent case studies, it considers how to strengthen these linkages and take advantage of the opportunities to generate added value. Active policies are needed so that countries, regions and cities can realise the potential benefits from linking tourism and creativity. Key policy issues are identified.

Located on the southern coast of China, Guangdong is the country’s most populous and rich province. It has 95.4 million inhabitants and provides one-eighth of the national GDP. A key development feature of Guangdong has been 'processing trade', which has allowed companies to profit from importing materials, assembling goods and exporting them via Hong Kong, China. The recent economic crisis has had a strong impact on the province, although Guangdong also faces in-depth structural problems. Growing labour costs and strain on land availability have increasingly challenged the province’s traditional model of development, as have new competitors in China and abroad. Meanwhile, regional disparities within the province have increased, with a high concentration of economic activities and foreign direct investment in the Pearl River Delta area, an agglomeration of nine prefectures of 47.7 million inhabitants that represents 79.4% of the province’s total GDP. This review assesses Guangdong’s current approach to economic development. The province is focusing on industrial policies primarily aimed at heavy manufacturing industries (e.g. automobile, shipbuilding, petrochemicals) and supported by investment in hard infrastructure transport projects and energy supply, along with the implementation of the 'Double Relocation' policies intended to move lower value-added factories to lagging regions through incentive mechanisms like industrial parks. The review discusses how some principles of the OECD regional paradigm could help Guangdong. It also addresses the huge environmental challenges that the province is facing and explores the opportunity for developing a green growth strategy. Strategies to improve Guangdong’s governance are analysed as well, with particular attention paid to co-ordination issues within the Pearl River Delta. The Territorial Review of Guangdong is integrated into a series of thematic reviews on regions undertaken by the OECD Territorial Development Policy Committee. The overall aim of these case studies is to draw and disseminate horizontal policy recommendations for regional and national governments.