Fiscal Decentralization in China: A Literature Review

Understanding the logic of fiscal decentralization is pivotal to the next steps of fiscal reform. The first step is a retrospection of the literature and evidence accumulated in the field. As a typical transition economy with rapid and extensive devolution reforms, China is the ideal context to examine the causes, processes, and effects of fiscal decentralization, which will attract numerous academic endeavors, both domestic and abroad. However, the literature has not been fully reviewed and the evidence on fiscal decentralization remains mixed and inconclusive. This paper is a comprehensive review of the latest advancements in the area of fiscal decentralization in China over the past decades. The processes, characteristics, and measurements of fiscal decentralization are firstly reviewed and the antecedents and consequences of fiscal decentralization are then synthesized. The knowledge gap and avenues for future research are finally discussed with the ultimate goal of making knowledge about fiscal decentralization in China contributive, accumulative, and sustainable.