Most of the attention in the literature has been focused on the initial decentralization. Tsui and Wang (2004) call fiscal decentralization a “handmaiden” to China’s growth. Chen (2004) argues that regional and local governments have better information, and so more control over expenditures, leading to improved efficiency in government spending, and thus led to more growth. Feltenstein and Iwata (2005) use national macro data to argue that decentralization led to both faster growth and higher inflation, but they do not separate the effects of fiscal and monetary decentralization. When China recentralized its monetary authority under Zhu.
