8
fiscal revenue can be measured by per capita budgetary revenue. (In fact, the two measurements
are highly correlated, with a correlation of 0.957.)
The need-based and pressure-based theories discussed above can also shed some light on
the cross-regional variation of local transfer. Along the line of the need-based argument, local
governments’ complaints about insufficient funding may have pressured the center to extract less
from the localities that experienced fiscal difficulties. Indeed, this argument is very similar to the
economic logic mentioned above, except that it points in the other direction: instead of focusing
on the rich provinces, it mainly concerns poor provinces. And this argument revolves more
around the fiscal side of the story than general economic performance.
The need-based argument suggests local fiscal difficulty as an explanatory variable. I
take local fiscal deficit, i.e. the gap between fiscal expenditure and fiscal revenue,
17
as an
indicator for local fiscal difficulty. But it is not enough to only look at the absolute amount of
deficit, and we must look at the magnitude of deficit in relation to fiscal capacity. Thus I divide
local deficit by local (self-generated) budgetary revenue and use the ratio as the direct
measurement for local fiscal difficulty. A high ratio of deficit to revenue indicates that the
locality is unable to generate sufficient funds for its own expenditure and must experience fiscal
difficulty. (This ratio is not highly correlated with local fiscal capacity. The correlation between
the ratio and per capita budgetary revenue is only –0.195.)
The pressure-based argument highlights the local political influence as an important
variable that accounts for cross-regional variation in local fiscal transfer. Since the provincial
members in the Central Committee of the Chinese Communist Party could use their formal
political representation to pressure the central government to make favorable policies for their
provinces, I take the number of provincial members in the Party Central Committee as the
measurement of provincial political influence. My study spans the years from 1995 to 2002,
which covers the Fourteenth and Fifteenth Party Central Committee.
18
I include all the members
of the two terms of Central Committee.
19
If a Central Committee member assumed any position
of provincial leadership such as governor, vice governor, Party secretary or deputy Party
secretary, I regard him/her as a provincial leader.
20
There are both full members and alternative
members of the Central Committee. They arguably should carry different weight on the central
policymaking, and the full members should be more influential. Thus I assign them different
coefficients of political power: each provincial full member gets two points and each provincial
17
Fiscal deficit here only concerns local-level revenue and expenditure, and it does not involve central-
local transfers. Thus local transfer to the center does not influence local deficit.
18
The Sixteenth Party Central Committee was elected in mid November 2002, which was very late into
the year. So I do not consider the influence of the new Central Committee on the policymaking in 2002,
but use the members of the Fifteenth Central Committee for the whole year of 2002.
19
The full list of Seventh to Fifteenth Party Central Committee members is available on
http://www.xinhuanet.com.
20
I found most biographies of the Party Central Committee members in Meirong He ed., Who’s Who:
Current Chinese Leaders (Zhongguo Dang Zheng Jun Gaoji Lingdaoren Cidian) (Hong Kong: Wen Wei
Publishing Co. Ltd., 2003), and Gucheng Li ed., Dictionary of Leaders in Mainland China (Zhongguo
Dalu Lingdaoren Cidian) (Hongkong: Ming Pao Enterprise Co. Ltd., 1997). The other members are
found on the internet.
Convention