Public Financial Management and the Campaign against Extravagant Position-Related Consumption in China

It is widely believed that public finance management is a key factor in keeping the government away from corruption and fiscal misconduct. However, rules and regulations of public finance management are embedded in the macro institutional settings, and thus are subject to broader influences impacting implementation of these rules. Employing the perspective of informal institutions, this research explores how formal financial rules interact with informal rules in position-related consumption in China. It finds that financial rules are relatively weak as compared to informal rules. In order to curb extravagant position-related consumption and to achieve good governance in China, it is imperative to take informal rules into consideration when designing the anti-extravagance policy.