Performance Budgeting Reform of a Chinese City: The Roles of External Pressure and Leadership

This chapter presents a case study of City A in Province X to understand why some Chinese local governments in the 2000s were interested in performance budgeting reforms, what institutional factors motivated and constrained their reform efforts, and how leadership might influence the initiation and implementation of the reform in the Chinese context. City officials’ interest in performance budgeting reform was further encouraged by central government policies in the mid- and late-2000s. The continuous economic and fiscal stress in the late 2000s created another window of opportunities to pursue drastic reform measures to rationalize spending and promote performance-oriented budget management. The Finance Bureau tried to leverage external expertise to overcome the information asymmetry problem with departments. Functionalist institutional theories suggest that institutional change happens because the existing institution can no longer support its social and economic functions in society and the macro environment demands a new institutional design.