Carsten Herrmann-Pillath, Zhu Qiuxia

• The fiscal reform of 1994 was introduced to strengthen the redistributive function of central government. In the aftermath of the reform it turned out, however, that the dominating cleavage is not necessarily the rivalry between "centre" and "regions", mainly because of the very complex relationships within the provinces. Though taxation itself is highly centralized there is a growing tendency of expensation of "extra-budget revenues". That is why the share of the central government concerning all revenues fell to 27%, falling considerably short of the purpose of the fiscal reform to increase the rate of central redistribution to 60% of the national fiscal ressources. Local communities have turned out to be rather successful in collecting non-tax revenues, concentrating on the non-state sectors of the economy. The problem is not so much the threat of fiscal decentralization but the definition of rules and procedures in the relationship between centre, provinces and local administrations.