The Fiscal Polititics of Economic Openness in Contemporary China

Date of Award

Spring 1-1-2025

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Political Science

First Advisor

Scheve, Kenneth

Abstract

This research examines how economic openness has reshaped fiscal governance, bureaucratic institutions, and distributive politics in China. Contrary to the prevailing notion that globalization weakens fiscal capacity, this study argues that China’s public and fiscal institutions have not only adapted to economic openness but have been strengthened as a result. Drawing on a combination of original firm- and industry-level data, trade and taxation records, and qualitative fieldwork, the dissertation explores three interrelated questions. First, it investigates how trade liberalization affected China’s fiscal structure, revealing that tariff reductions were strategically allocated to firms directly controlled by the central government, ensuring continued revenue dominance by the central government. Second, it examines the role of bureaucratic capacity expansion in sustaining fiscal centralization, showing how globalization-induced reforms prompted an increase in tax enforcement capacity and revenue extraction. Third, it analyzes the redistributive consequences of China’s fiscal transformation, demonstrating that central-local fiscal transfers were leveraged to mitigate social unrest, particularly compensating laid-off state-sector workers in urban areas. These findings contribute to broader debates on globalization and state capacity, illustrating that economic openness does not necessarily lead to fiscal erosion but can instead reinforce centralized authority under specific institutional conditions. By shedding light on the political economy of China’s economic transformation, the dissertation provides insights into how globalization can be harnessed to maintain control over fiscal resources.

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