The Future of Federalism
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The Future of Federalism

Intergovernmental Financial Relations in an Age of Austerity

Edited by Richard Eccleston and Rick Krever

The crisis and its aftermath had a dramatic short-term effect on federal relations and, as the twelve case studies in this volume show, set in place a new set of socio-political factors that are shaping the longer-run process of institutional evolution and adaptation in federal systems. This illuminating book illustrates how an understanding of these complex dynamics is crucial to the development of policies needed for effective and sustainable federal governance in the twenty-first century.​
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Chapter 10: The financial crisis and the challenge of fiscal federalism in China: the 2008 stimulus and the limits of China’s intergovernmental system

Christine Wong

Abstract

On the strength of a massive stimulus programme implemented from late 2008 onwards, China became the first major economy to emerge from the global financial crisis, returning to its high growth path by the second half of 2009, and growing by 10.4 per cent in 2010. For a time China was widely admired for what appeared to be a strong, rich and effective public sector able to implement the stimulus programme with great force and in record time. In the years since, the world learned that the stimulus programme was carried out mainly by local governments, and that once started, the central government was unable to control its momentum. This chapter looks at this historical episode to explain how China’s response to the global financial crisis exposed the cracks in the intergovernmental fiscal system. China has now embarked on an ambitious, comprehensive round of fiscal reforms that aims to fundamentally reshape public finances and lay the foundation for a modern system of governance.

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