Citizen Expectations and Improvement of Government Functions: A Study of Importance and Performance of Budgetary Demands in China (公民期待和政府功能的改进:一项对中国预算需求和绩效的研究)

Authors


Abstract

How should the government allocate fiscal resources among different sectors in order to satisfy the needs and expectations of its citizens? This question is worth considering because public finance in China has increased at a rate much higher than that of GDP in recent years. Based on a classification of public expenditures, we classify public services and goods provided by the Chinese government into five functions: the administrative, law and order, developmental, welfare, and humanitarian functions. We employ key findings from a survey provided by the International Social Survey Program (ISSP) questioning the importance and performance of different programs in a questionnaire sent to young educated citizens – the leaders and administration of tomorrow. The findings of the survey indicate the highest priority of the five state functions was as follows: welfare, humanitarian, developmental, law and order, and administrative. A comparison between this priority ranking and the actual spending levels indicates that the two sets of preferences roughly correspond, with one exception: the developmental function ranks as the top priority in actual spending but third priority in public expectations. If the expectations found in this survey reflect the broader public views, the survey suggests that, to be more responsive, the Chinese government needs to reallocate its fiscal resources towards welfare and humanitarian functions.

政府应该如何在不同的部门中配置其财政资源,以满足公民的需求和期待?近年来中国财政规模以远远高于国内生产总值的速度增长,使得这个问题尤为值得研究。本文将中国政府提供的公共物品和服务区分为五类:行政管理、法与秩序、经济发展、社会福利以及人文发展功能,并借用国际社会调查项目 (ISSP) 的“政府角色”问卷的研究设计,制作了一个有关中国政府不同支出项目的重要性和绩效的问卷。这个问卷在一所中国的精英大学的学生(他们可能成为未来中国各行各业的领导人物)中实施。问卷调查的结果表明大学生对五项功能的优先排序为社会福利、人文发展、经济发展、法与秩序和行政管理。我们将这一优先排序同中国政府的实际支出的优先性排序进行了比较,发现两者大体一致,但有一个例外:在实际支出的优先性排序中经济发展位居第一,而在公众的期待中排位第三。如果此次调查所揭示的期待确实反映了更为广泛的公众的观点的话,则可以断言,中国政府为了使自己的财政支出行为更加符合民意,有必要把财政资源投向的重点转到社会福利和人文发展领域。

The size of China's public financial sector has increased at a rate much higher than that of GDP in recent years (Wu and Lin 2012). In 2010, total budgetary revenue and expenditure were 8,310 billion and 8,987 billion yuan respectively, equal to more than 20 per cent of GDP (NBS 2011). Indeed, public spending in 2010 would be close to 30 per cent of GDP if extra budgetary expenditures, land sale income and social security payments were added. With such enormous resources under the direct control of government, the following questions concerning public attitudes should be addressed. First, how should fiscal resources be distributed among different sectors in order to best serve public needs and demands? What sectors do citizens value most, and what sectors do they consider less important? Second, to what degree are citizens satisfied with the performance of government expenditures in each sector? In what sectors are they satisfied with governmental performance and in what sectors are they dissatisfied? These questions may shed light on public attitudes towards the functions and performance of the Chinese state, and the direction the public desires the state to pursue in order to improve its provision of public goods and services.

In this study, we classify governmental expenditures into five broad functions: administrative, law and order, developmental, welfare, and humanitarian. The attitude of the public towards each of the five can be measured by their opinions of various program expenditures by the governments. We designed a questionnaire and conducted a survey among young educated citizens to demonstrate how the Chinese government might assess public opinion and improve its responsiveness to public preferences and needs.

In the rest of the article, we first explain our classification of the five state functions, followed by a presentation of the data collection and analysis methods. We then proceed to report and analyse the major statistical findings. These findings are then compared with actual public spending in China in recent years to examine the respective alignments

The Five State Functions

The Chinese fiscal authority reports its budgetary expenditures under more than twenty items. We believe these items can be more usefully placed under a more generalised typology of five state functions: administrative, law and order, developmental, welfare, and humanitarian. In doing so, we have been inspired by Borre's (2003) theory of the three-dimensional state agenda. He argues that in present-day societies, especially those most advanced economically, one may find a three-way political agenda, or three concepts of the roles of the state: the law and order state, the welfare state, and the humanitarian state. The law and order state is oriented towards the physical security of its citizens, protection of private property, and the development of national infrastructure. Historically, the European nation-states emerging in the eighteenth century were essentially authoritarian states as three quarters of their budget were devoted to military affairs (Mann 1980). These states, England in particular, were what Brewer (1989) has called ‘fiscal-military states’, because the major functions of the states were to prepare for wars by raising revenues and to wage war by deploying military forces. The early phase of industrialisation, roughly corresponding to the nineteenth century, saw a rise of the classical liberal agenda, according to which the state should limit its function to maintaining law and order domestically and providing national defence, leaving the economy to market forces (Harling and Mandler 1993). However, alongside the development of industrialisation and democratisation in western countries, a new welfare agenda emerged by the twentieth century and became dominant thereafter. According to this welfare state agenda, the state should take active responsibility for providing basic welfare, such as pensions and benefits, unemployment insurance, and the redistribution of income from the rich to the poor (Marshall 1950). The rise of this agenda significantly altered the structure of public expenditures in western countries. In virtually every democracy since the end of World War II, social protection and welfare has become the single largest category of government spending (Wilensky 2002). Finally, as western countries entered the stage of affluence some decades after the end of the war, a set of post-material demands for government provision came to the fore. The focus of these demands was on what Maslow (1943) called the higher needs of creativity and self-development or what Inglehart (1991) described as non-material or post-material values. The increase of public spending on environment, education, and arts and culture represent a positive response by western states to these demands.

To Borre's three-dimensional state agenda we have chosen to add two additional functions – administrative and developmental. There are two reasons for these additions. First, the administrative function concerns the maintenance and operation of the government itself, or administrative overheads, which are defined by the National Audit Office of England (2003:54) as ‘expenses other than the costs of labour and materials directly used to deliver a service or produce a good, for example the cost of senior management or of the building where the service is delivered.’ In order to provide public services and goods, the government needs its own organisation, operated and maintained by human and financial resources. Yet, from the perspective of taxpayers, the less resources the government spends on the administrative function, the better it is, so long as the quality of public services can be maintained. But Borre's three state agenda fails to reflect this perspective.

Secondly, for Borre, the authoritarian law and order state is oriented towards the physical security of the citizens, protection of private property, and the development of national infrastructure. However, the third of these tasks implies an interventionist state, while the first two tasks conform to the functions of a minimal state according to a strict liberal agenda. Thus, Borre's authoritarian state contains elements that go beyond the basic requirements. The way to resolve this is to differentiate the states’ developmental functions from other functions. Indeed, the developmental functions have been a critical feature of many successful countries when going through rapid economic growth, such as Germany, Japan, and South Korea, and a vast amount of literature has been produced on the theory of the developmental state (Johnson 1982; Woo-Kuming 1999).

Thus, we believe our analytic framework of the five functions of the state is a better modification of Borre's theory of the three essential state functions.

Like early modern European states, Imperial China was also a fiscal-military state in the sense that the state spent virtually all its fiscal resources on payment to imperial civilian and military officers as well as soldiers. For example, in 1765, under the Qianlong Emperor, the sectoral distribution of state spending was but twofold – central and local. At the central level 75 per cent of funds went on soldiers’ pay, 12 per cent on civilian officers’ pay, and 13 per cent for other expenses. At the local level 58 per cent of spending was on solders’ pay, 26 per cent on civilian officers’ pay, 9 per cent was for the imperial post offices, and 7 per cent for other expenses (Guo et al. 2002:101–2). The Chinese state performed essentially only two of the five state functions illustrated here: extensive law and order functions and basic administrative functions. This situation remained unchanged in Republican China. In 1932–1933, the Nanjing government spent 45.9 per cent of its fiscal resources on defence, 19.4 per cent on the party and government, and 30 per cent on serving debt interests and paying reparations (Feuerwerker 1983). The People's Republic of China changed this picture fundamentally. Since its establishment in 1949, with the exception of the years during the Korean War (1950–53), the administrative and military expenses have been kept to less than a quarter of the total budgetary spending.

China experienced two failed attempts of industrialisation before 1949, the Self-Strengthening Movement in the second half of the 19th Century (Feuerwerker 1958) and the National Resources Commission of the Nanjing government (Bian 2005). The Communist Party came into power with a strong desire to develop the economy. In 1957, the last year of the First Five Year Plan, budgetary expenditures on basic construction accounted for 42 per cent of the total budgetary spending and 82 per cent of the total national fixed-asset investment (NBS 2005). During the liberalisation reform era of the last thirty years, while the state has no longer been the single engine of economic development, its thirst for intervention in the economy has not waned. In 2010, the government devoted more than 30 per cent of its total budgetary expenditure to economic development. Almost all the revenue the government has raised came from land sales, which amounted to 1,026 billion yuan in 2008, or 16.72 per cent of the total budgetary revenue, a substantial part of which was channelled into economic construction.

The Chinese state did little to provide its people with welfare before 1949. During the planning era, China provided its urban residents with pensions for retirement and medical and health care through state-owned enterprises and working units, while peasants, who made up the majority of population, enjoyed only limited social relief through their rural communities. During the mid-1990s, as state-owned enterprise reforms caused unemployment in the urban sector, the Chinese state started establishing a contribution-based social safety net, of which the most important component was the urban basic pension system (UBPS). This social welfare system, the UBPS in particular, was subsidised greatly by general budgets from the very beginning. These developments have led the Chinese state to assume an increasingly important role in social welfare provision (Frazier 2004).

Finally, the rapid economic growth in the past 30 years has also forced China to face social problems that developed countries encountered over a period of more than 100 years: social dislocations, poor planning, environmental degradation, insufficient public funds for compulsory education and the highly uneven distribution of low-quality higher education despite widespread poverty, and the decline of social mores. These problems are a result from the state's poor performance of its humanitarian function, and increased fiscal input is indispensable to their resolution.

Although China is still a developing country, its government is already exercising all five state functions. So, what attitudes do Chinese citizens take towards the performance of the government in these functions? Which functions are the most important and which ones are seen to be outperforming others? We will try to answer these questions with data collected from a survey of younger highly educated Chinese citizens, the next generation of opinion-shapers.

Surveying Chinese Opinion

We designed a questionnaire for our survey by referring to categorical expenditures reported by the Chinese authorities. We asked respondents to evaluate the importance and performance of 18 fiscal expenditure items by the Chinese government, which are classified into the five functions identified above (see Table 2). For each item, we used the methodology of the role of government survey of the International Social Survey Program (ISSP 1996) which asked respondents to indicate their preferences for budgetary allocation according to five options, namely: whether expenditures on that item should be increased a lot or a little, whether they should stay the same, or whether they should be decreased a little or a lot. The respondents were not asked to try to balance the budget; they were, however, warned that ‘if you say ‘much more,’[for all categories] it may require a tax increase to pay for it.’ The choice of ‘increase a lot’ for an item meant that the respondent considers it very important, while the choice of ‘decrease a lot’ meant the respondent considers it least important. We used a Likert scale to operationalise the five response categories, in descending order, from 5 for very important to 1 for least important.

Table 2.  The importance and performance score of state types and main expenditure items
  Importance Performance Gap
  1. Notes: The values of gap are calculated through importance minus performance.

The administrative function (average) 2.67 2.67 0
Party and gov. administration2.412.400.01
Payment for civil servants2.562.75−0.19
Pensions for retired gov. employees.3.042.860.18
The authoritarian function (average) 3.51 3.18 0.33
Defense and national security3.533.65−0.12
Police and public safety3.482.810.67
Fire protection3.523.070.45
The developmental function (average) 3.35 2.99 0.36
Agri. forestry and water conservancy3.662.990.67
State-owned enterprises2.752.88−0.13
Trans., communication, and other economic infra.3.643.100.54
The welfare function (average) 4.22 2.46 1.76
Social security (pension et al.)4.242.621.62
Unemployment insurance and poverty relief4.122.441.68
Health care and insurance4.332.531.80
Housing4.182.261.92
The humanitarian function (average) 3.77 2.98 0.79
Foreign aid and humanitarian aid2.783.45−0.67
Environment protection4.182.491.69
Culture and arts3.592.860.73
Science and technology4.033.260.77
Education4.282.861.42
Average 3.50 2.86 0.64
Table 1.  Demographic feature of sampled respondents (%)
Gender Political status Residence registration Consumption level
  1. Notes: Total observations: 1368; missing data are not reported.

Male 40.6Ordinary citizens 9.3Urban 57.2(RMB per month)
Female 58.3CCP member 34.7Rural 42.10–300 3.4
 CYL member 53.7 301–600 29.5
 Democratic party 0.3 601–1000 40.1
   1001–1500 16.4
   1500–2000 5.8
   2001–5000 3.1
   5001 and above 0.5

For the same expenditure items, we also asked the respondents to evaluate the performance of expenditures. The responses on perceived performance were measured again using the same Likert scale and descending rank order. We then conducted an importance-performance analysis by creating a two-by-two grid, plotting the average scores of importance data along the horizontal axis and the average scores of performance data along the vertical axis. We used the mean of the Likert scale (point 3 on the axes), to divide the grid into four parts. Quadrant A represented success areas where service providers were perceived as to be doing a good job with providing services which citizens valued. Quadrant B was the most critical quadrant, as it contains services that citizens valued but suffered from poor performance ratings. This denoted areas where public administrators should improve performance, for instance, by allocating more fiscal resources. Improvement of these services would have the largest contribution to meeting the desires of the public and achieving satisfaction. Quadrant C contained services with both low importance and low performance. From the public's perspective, these were the services that should be given lower priority. Quadrant D contained services of low-importance, yet with above-average performance. This suggested administrators may be allocating too many resources to these services and may need to reallocate them in order to improve overall satisfaction (Martilla and James 1977; Van Ryzin 2004; Van Ryzin and Immerwahr 2007).

We conducted an opinion survey of young Chinese citizens in the city of Xiamen in November 2010. Respondents were selected through a convenient rather than representative sampling method and 1,368 valid responses were received. The respondents selected were young and tertiary educated (BAs to PhD holders), and among the segment of the population most likely to be engaged in online political forums. Such engagement, according to a study of online public opinion in China, is seen as driving public opinion, and ultimately, policy-making (Johan 2005).

The Findings

Table 2 reports average importance and performance scores for the 18 expenditure items and the five state functions, along with gaps between the two sets of scores. Starting with the importance statistics, if the average score for an expenditure category is above 3, then the majority of respondents want the government to increase expenditure in this category; if the score is below 3, this indicates that most respondents want the government to reduce expenditure in the category. The average score of importance for the 18 expenditure categories was 3.5, indicating that respondents expect the government to increase fiscal expenditure. However, this does not mean they want expenditures to be increased in every category. Indeed, of the 18 expenditure categories, eight scored above 4 in importance, six between 3 and 4, and four scored below 3. The four expenditure categories relating to the welfare state all scored above 4, with health care and insurance at 4.33 as the highest of the 18 expenditure categories. Accordingly, the average score of the welfare state (4.22) is the highest of the five state functions. Of the five expenditure categories relating to the humanitarian function, three are marked above 4 points. They are education, environment protection, and science and technology. Culture and arts score relatively low at 3.59. Only the score of 2.78 for foreign aid is substantially below 3. The humanitarian function ranks as the second most important. The scores for the three expenditure items under the law and order function were all around 3.5, making the average score for this function 3.51, the third highest among the five. Of the three expenditure categories under the developmental function, the scores for economic infrastructure, including transportation and communication, agriculture, forestry and water conservancy, scored 3.65. However, the score for expenditures by state-owned enterprise is only 2.75. The average score for the developmental function, 3.35, ranks fourth. Finally, the average score for the administrative state is just 2.67, the lowest among the five functions and well below 3. Of the three categories under this function, the points for party and government administration and payment for civil servants and pensions for retired government employees are 2.41, 2.56 and 3.04, respectively.

Turning to the statistics of performance, a sharp contrast emerges. The average performance score for the 18 expenditure categories is just 2.86, indicating that the respondents were generally dissatisfied with government allocation of financial resources raised from taxpayers. Of the 18 categories, 14 scored below 3, with the rest between 3 and 4. The welfare function, which gained the highest score in the importance evaluation, received the lowest score in the performance evaluation. None of the four categories relating to the function scored above 3, with 2.26 for housing security as the lowest ranked among all 18 categories. The administrative function had the second lowest score among the five state functions; again, none of the three categories under it scored higher than 3. The score for party and government administration was just 2.4, the second lowest among the 18 expenditure categories. The average performance evaluation score for the law and order function was 3.18, the highest among the five states. Under this function, the scores for national defence and fire protection are above 3, however, the score for police and public safety is 2.81. With an average score of 2.99, the developmental function ranked as the second highest among the five in the performance evaluation. Of its three components, economic infrastructure (transportation, communication, etc.) scored above 3, while agriculture was close to 3 and state-owned enterprises scored 2.86. Finally, the score for the humanitarian function was 2.98, the third highest among the five state functions. Of its components, environmental protection, education, and culture/arts scored well below 3, while foreign aid and science/technology were well above 3.

Accordingly, we created a two-by-two grid with the importance measurement as the horizontal axis and the performance measurement as the vertical axis (Figure 1). The welfare state falls into the quadrant representing a critical problem area, suggesting that the sampled respondents believe that the government should place more fiscal resources into the welfare function. The law and order function falls into the quadrant of ‘keep up the good work’, although one of its components, police and public safety, appears in the critical problem quadrant. The administrative function falls into the quadrant of low priority, with two of its three components, party and government administration and payment for civil servants, located in this area. The developmental and humanitarian functions occupy the region between the ‘keep up the good work’ and the critical problem quadrants.

Figure 1.

Importance-Performance grid

In summary, in terms of the appropriation of fiscal resources, the priority list derived from our analysis runs as follows: the welfare function, the humanitarian function, the developmental function, the law and order function, and the administrative function (Table 4). An interesting question now arises: to what degree does this list reflect what the Chinese government has actually accomplished in recent years?

Table 4.  A Comparison of the Two Priority Ranking: Expectation versus Actuality
  Citizens’ Expectation Actual Spending
  Gap Rank Share Rank Growth Rank
  1. Source: National Bureau of Statistics (NBS). China Statistical Yearbook 2008–2011

  2. Notes: The values of gap are calculated through citizens’ expectation importance minus performance. The value of share is based on data of 2010 and growth is the average value of 2007–2010.

  3. expressed as percentage.

Welfare1.76118.15326.441
Humanitarian0.79223.43221.213
Developmental0.36330.74125.772
Authoritarian0.33412.07412.454
Administrative0.00510.3154.935

A Comparison with Actual Expenditure

The actual expenditures for comparison are those from 2007 to 2010. This period is selected because it is the most recent for which data is available, and also because the Chinese fiscal authority has adopted a new classification of revenue and expenditure since 2007, making the fiscal data for the years from 2007 incomparable to those before 2007. Table 3 reports the amount and shares of 20 budgetary expenditure items and the five state functions in 2010. Figure 2 presents the annual growth rates of the expenditures on the five functions from 2007 to 2010. Table 4 summarises the two ranking orders of the student evaluation and actual spending.

Table 3.  The Five State Functions and Main Items of Budgetary Expenditure, 2010
Functions and expenditure items Amount (100 million yuan) Share (%)
  1. Source: National Bureau of Statistics of China(NBS). China Statistical Yearbook 2011.

  2. Notes: in the line of total, we report national government revenue in 2007–2010. All items in table are calculated at constant prices. Average growth rates of each type of the state are calculated through the sum of its all sub-items.

The administrative function 9337.16 10.39
General Public Services9337.1610.39
The authoritarian function 10851.07 12.07
National defense5333.375.93
Public security5517.706.14
The developmental function 27642.99 30.74
Urban and Rural Community Affairs5987.386.66
Agriculture8129.589.05
Transportation5488.476.11
Exploration, Power and Information3485.033.88
Commerce and Services1413.141.57
Financial Supervision637.040.71
Land and Weather1330.391.48
Grain and Oil Reserves1171.961.3
The welfare function 16311.68 18.15
Social security and Employment9130.6210.16
Medical and Health Care4804.185.35
Housing Security2376.882.64
The humanitarian function 21053.56 23.43
Education12550.0213.96
Environment Protection2441.982.72
Science and Technology3250.183.62
Culture, Sport and Media1542.701.72
Post-earthquake Reconstruction1132.541.26
Foreign aid136.140.15
Total 89874.16 100.0
Figure 2.

Growth of the spending on the five state functions in China, 2007—2010

Source: National Bureau of Statistics (NBS). China Statistical Yearbook 2008—2011 Notes: The growth rates are calculated at constant price and expressed as a percentage.

The data reported in Table 3 and Figure 2 clearly shows that the developmental function is still the highest spending priority of the Chinese government. The expenditure items under the developmental function extend from urban and rural development and economic infrastructure to finance and commerce. The funds devoted to this function accounted for 30.7 per cent of the total budgetary expenditures, a share far above the second largest share of 23.43 per cent for the humanitarian function (Table 3). The spending on the developmental function grew at an average annual rate of 25.8 per cent between 2007 and 2010, only slightly lower than the highest growth rate of 26.4 per cent for the welfare function. Indeed, if governmental spending of revenues from land sales were taken into account, the balance would tilt further in favour of economic development. There is no doubt that the Chinese state still considers economic development as its top priority when allocating fiscal resources. This deviates considerably from the desire of the sampled respondents, who prioritised welfare and humanitarian functions above economic development (See Table 4).

The priority of actual spending for the other functions corresponded fairly closely to the ranking derived from our survey of young educated Chinese citizens. With an average growth rate of 26.4 per cent, expenditures on welfare grew the most rapidly, and ranked third in terms of its share of total expenditure. Spending on the humanitarian function grew by 21 per cent per year, the third fastest of the five functions. Its share of the total expenditure is the second largest of the five functions. Correspondingly, our sampled citizens ranked the welfare and humanitarian functions as their first and second priorities, respectively. In line with their ranking of the administrative and law and order functions as least important and second least important, these have the lowest government priorities, as indicated by actual spending. Of the two, the spending on the administrative function grew by 4.9 per cent per year, less than one fourth of the overall growth rate of 18.51 per cent, for the period under study.

Conclusion

How should the government allocate fiscal resources among different sectors in order to satisfy the needs and expectations of its citizens? This question is worth considering not least because the size of China's public finance has increased at a rate significantly higher than that of GDP in recent years. This article classified fiscal expenditures into five functions: administrative, law and order, developmental, welfare, and humanitarian. Using key questions on the governments’ role survey provided by the ISSP and an importance-performance analysis, a questionnaire was designed and distributed to young, tertiary educated citizens of Xiamen. The findings of the survey were then compared with the actual budgetary spending from 2007 to 2010.

A comparison of respondents’ rankings of importance and the actual government spending indicates that the two sets of priority rankings correspond roughly, but with one important exception: the developmental state ranks as the first priority in actual spending but only the third priority in public expectations. The Chinese state continues to prioritise spending of fiscal resources on economic affairs while its citizens desire reallocation of spending towards welfare and humanitarian functions. This may be because under the current political and fiscal system, government officials at every level have strong incentives for promoting economic growth: the central leadership does so for regime legitimation, and local officials for promotion and personal gain (Li and Zhou 2005). However, the central leadership must realise that economic growth alone may not be enough to legitimise its rule. It must overcome the inertia of the growth-first mentality embedded in governmental officials, especially those working for local governments. The Chinese state needs to respond to the demands of its citizens and reorient its fiscal resources towards welfare and humanitarian functions.

Acknowledgements

The author acknowledges financial supports for this project from the National Social Science Fund (Grant No. 10BZZ035), the “9-8-5” Program of Xiamen University, and the “2-1-1 Program” of the Public Policy Institute of Xiamen University. The author also thanks Yuyi Zhuang for his effective assistance and a sample of Chinese university students in Xiamen for their contribution to data collection. Two anonymous referees also helped improve the article.

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