The Economist’s Daily Chart examines China’s bottom-heavy government spending and small but stubborn budget deficit. Expenditure at lower levels is “often wasteful, as local governments compete with neighbors to promote industry, not provide public goods like clean air. A tax on property could reverse this by increasing revenues and encouraging public services.”
Competition between local governments has led them to take on heavy debt, estimated at 27% of GDP in 2010 and much higher now. Although they receive a high proportion of total government revenues, moreover, the money is spread thinly, leading many authorities to supplement their budgets with highly unpopular land grabs and subsequent redevelopment.