Decentralization of government spending and taxing has always been a central tenet (a basic principle) for guiding public finances (government spending and taxation). Describe what issues arise with decentralization in China's system of public finances.

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The Answer is The central issue is that while expenditures have been decentralized (including mandated expenditures from the central government) revenue collection (taxes) is highly centralized. This has created a financing deficit for local governments-especially related to infrastructure spending. Thus local governments (provinces and downward localities) have come to rely more on land sales, bank and trust finance, and bonds. This has created concerns regarding financial stability (the potential for default) by some of the local governments. In turn, the central government would need to step in.

Decentralization of Government Spending and Taxing Has Always Been a Central