IJIMT 2011 Vol.2(2): 147-151  ISSN: 2010-0248
DOI: 10.7763/IJIMT.2011.V2.121

Study on the Chinese Local Government Financing Efficiency Based on Entropy Method

Fu Chuanming

Abstract—After the tax-sharing reform in 1994, The Chinese local governments have been in a state of financial deficiency for most of the time under the circumstances of financial and administrative asymmetry. The Chinese local governments have tried various approaches to finance. This paper presents decision support for the local governments choosing optimal financing approach. The four financing approaches commonly used by the local governments at present are reviewed and then by using entropy method, the efficiencies of the four financing methods are evaluated and compared. The result shows that the efficiency of local bonds financing is higher than that of land financing, platform financing and financial allocation by the central. It should be the main financing channel of the local governments. Land financing and platform financing have relatively low financing efficiency.

Index Terms—entropy method; financing efficiency; local government bonds; financing platform

Fu Chuanming, from Wuhan, P.R. China, is currently pursuing the Ph.D. degree in the School of Economics, Huazhong University of Science and Technology. He is a lecturer in economics at Wuhan Institute of Technology.(Phone:+86-027-63422329; e-mail: witfu@yahoo.com)

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Cite: Fu Chuanming, "Study on the Chinese Local Government Financing Efficiency Based on Entropy Method," International Journal of Innovation, Management and Technology vol. 2, no. 2, pp. 147-151, 2011.

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