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Public Finance and Management
Volume 11, Number 3, pp. 262-283
2011
THE RATIONALIZATION OF PUBLIC
BUDGETING IN CHINA:
A REFLECTION ON PARTICIPATORY
BUDGETING IN WUXI
Yan Wu
Department of Public and Social Administration,
City University of Hong Kong
Wen Wang
Department of Public and Social Administration
City University of Hong Kong
ABSTRACT
Participatory budgeting (PB) has been introduced to China at the grass-root level to
strengthen the influence of the public in the budgetary decision-making process. Based on a
theoretical framework from the perspective of budgetary decision-making, this paper investi-
gates the driving forces for the implementation of PB in Wuxi City, the procedures of citizen
participation, the outcomes of participation, and the future challenges in implementing the
reform. Field research was conducted to collect data for this case study, which finds that Wuxi
has made some progress in enhancing social, political, economic and technical rationalities
but not in legal rationality. This paper also discusses the policy implications of this case study
for further development of PB in China.
1. INTRODUCTION
In recent decades, China’s economic growth brought by modernization and
marketization has generally enhanced the income and material living standards
of Chinese people. However, the transformation of the political and adminis-
trative systems is lagging behind the soaring economic development. Mean-
while, the growing citizenship awareness is appealing for an introspection of
the relationship between the state and the society. An increasing number of
conflicts between the state and the society reveal a rising social dissatisfaction
towards the authority. This dissatisfaction reduces the capacity of governments
to make and implement public policy (Pierre and Peters, 2000; Scott, 2007).
Budgetary decision-making plays a decisive role in public policy. Budgeting is
politics (Wildavsky, 1964), because it is about distributing scarce resources
and making choices on alternative plans for government operation. Obviously,
public budgeting is closely related to public interests and social welfare as
well as the state-society relationship. Hence, budgeting plays a significant role
in mitigating social dissatisfaction and consolidating state legitimacy. Howev-
263 Wu & Wang
er, few existing studies discussed these issues from the perspective of public
budgeting.
Given that market-oriented economic reforms have fundamentally changed
China’s economic structure and the relationship between the state and citizens
as taxpayers, strengthening the rationality and democracy of public budgeting
has been one of the major tasks in China’s fiscal reform (Ma, 2005). In view
of this demand, citizen participation in public budgeting processes, often la-
beled participatory budgeting (PB), has been introduced to some local gov-
ernments in China as a new method to improve the financial accountability of
the government (Ma, 2009) and the rationality of the current decision-making
procedures of public budgeting.
PB came into existence in Brazil for the first time. After its first imple-
mentation in Porto Alegre in 1989, many countries, developed or developing
ones, began to adopt this model. Up till now, PB has been adopted in many
countries and regions, including Europe, North and South America, and Asia.
In 2005, some cities in China began to implement PB and have made some
substantial progress, setting a great example for the development of PB in
China. The first group of pilot cities to implement PB includes Wenling in
Zhejiang province, Wuxi in Jiangsu province, Harbin in Heilongjiang province,
and Shanghai (Chen, 2007). In 2010, more cities have joined in this reform,
including Jiaozuo in Henan province, Ninghai in Zhejiang province, and Yun-
long County in Yunnan province (Meng, 2010).
Though citizen participation in public budgeting processes has received
attention for decades, research in this area still has significant limitations. We
are in the early stage of theory development for PB. Though there has been
quite some empirical work in this area, largely case studies, few definitive
statements can be made on what makes PB successful or unsuccessful and if
we can generalize the conclusions to all stages of the budgeting process and
for all participants in different localities (Ebdon and Franklin, 2006). We
choose to study Wuxi based on the following considerations. First, this study
adds to the literature on PB in developing countries. Second, PB in Wuxi has
developed a relatively stable pattern. Among those pilot cities, only Wuxi and
Wenling have implemented PB continuously since 2005 (Wenling stopped
once temporarily in 2007). Third, PB in Wuxi has not attracted enough aca-
demic attention. In comparison, Wenling has been well-studied because it first
introduced public participation into the budget decision-making process in
Local People’s Congress. Wuxi has achieved a great success in PB in a dif-
ferent way but a comprehensive analysis on Wuxi’s experience is still not
available in the literature. Finally, Wuxi introduces public participation into
the budget compilation process of the government’s budgetary deci-
sion-making, which not only has a significant influence on policy outcomes
but is more feasible to be promoted in other localities than a political reform in
PFM 11/3 264
people’s congresses.
This paper intends to provide a comprehensive analysis on participatory
budgeting reform in Wuxi, focusing on the driving forces for its implementa-
tion, the procedures of citizen participation, the outcomes of participation, and
the future challenges in implementing the reform. To begin with, this paper
gives a description of PB and provides a theoretical framework for the evalua-
tion of PB from the perspective of budgetary decision-making. Then it ana-
lyzes the challenges of public budgeting in China’s contemporary context,
followed by a comprehensive case study of Wuxi on its implementation of PB
reform and its future challenges. The final section concludes.
2. PARTICIPATORY BUDGETING AS A REFORM TO ENHANCE
BUDGET RATIONALITIES
2.1 What is Participatory Budgeting?
PB is a creative decision-making process that involves citizens to decide or
help decide how to deal with disposable public resources. It is regarded as an
important tool for an inclusive and responsible government to implement its
policies. In PB, local citizens will be able to gain first-hand information about
government operation and directly influence policy-making. With their in-
volvement in decision-making and participation in related forums and meet-
ings, citizens will have opportunities to play a role in allocating resources,
prioritizing social policy programs and supervising the use of public expendi-
ture. Citizens and social organizations can discuss the priority of different
projects and vote on the expenditure plan, allowing local citizens to audit and
supervise the budget and expenditure of the government (Ahah, 2007; Chen,
Jiagang, 2007; Participatory Budgeting Unit, 2009; Wampler, 2000). Tradi-
tional participation mechanisms include “public hearing, citizen forums,
community or neighborhood meetings, community out-reaches, citizen advi-
sory groups, and individual citizen representation. Citizen Surveys and focus
groups, the Internet, and e-mail are also used” (Wang, 2001: 322).
PB was initiated in Porto Alegre, Brazil in 1989. It was adopted by the
Workers’ Party, a progressive political party founded during the military dic-
tatorship from 1964 to 1988, to help poor citizens and neighborhoods obtain
higher levels of budget resource (Wampler, 2000: 3). As of 2004, 194 of the
approximately 5.56 thousand Brazilian municipalities, including most of the
state capitals and larger cities, allocated part of their budgets on the basis of
participatory budgeting (Medeiros, 2007: 131).
Although the procedures of participation vary across cities, Wampler (2000:
7-8) generalizes the following common features of the procedures in munici-
pal governments in Brazil: (1) Sustained mobilization of participants and
265 Wu & Wang
year-long mobilization of their elected representatives (citizen-delegates); (2)
The division of the municipality into regions to facilitate meetings and the
distribution of resources; (3) The municipal government creates a Quality of
Life Index to measure the level of poverty, size of population, and quantity of
infrastructure across regions. Each government designs its own formula to
ensure that regions with higher poverty, larger population size, and less infra-
structure receive a higher proportion of resources than those better-off neigh-
borhoods; (4) Public deliberation and negotiation between participants and the
government over resource allocation and other relevant policies, the results of
which become part of the public record.
Rules of PB vary from city to city, and from state to state, given that they
are designed by government officials “with input from citizens” (Wampler,
2000: 7). Thus, PB will gain new features when it is introduced in the Chinese
context. Based on the experiences from other countries, six questions need to
be considered in order to implement PB. First, what is the procedure of PB? It
is mainly consisted of mobilization, deliberative discussion at different levels
(community assemblies, local and departmental meetings, and municipal-level
assemblies etc.), polling, budget execution, and evaluation. In a majority of
cases, participatory budgeting is combined into the decision-making process of
annual governmental budgeting. Hence, the timing of citizen participation
should be subject to the schedule of governmental budgeting. Second, who has
the authority to organize PB? Special agencies are often set up for participato-
ry budgeting in some places. With regard to their functions, some of these
special agencies are designed for the convenience of budget discussion, such
as the budget sub-committee of the local Community Committee in Bradford,
Britain (Lavan, 2007); some are for coordinating budgeting preparation, such
as the Neighborhood Coalition's Finance Committee in Guelph, Canada
(Lerner and Wagner, 2006), and the Finance Sub-committee of People’s Con-
gress in Xinhe Town, China (renda caijing xiaozu) (Niu, 2007); some are for
supervision over project construction, such as the Local Committee in Brazil
(Medeiros, 2007). Third, what are the criteria of resource distribution? There
are two ways of distributing budget resource: One way is to use certain criteria
to determine the budgeting priorities among regions at different levels of de-
velopment. For example, Brazil uses a Quality of Life Index, and Canada has a
Budget Matrix System to evaluate the priorities of programs (Wampler, 2000).
The other way is to determine the ranking of programs according to citizens’
votes. Fourth, what should be decided through PB? Contents of discussion can
be sorted into two kinds. One is focusing discussion on specific public infra-
structure projects. The other concerns the general expenditure of public poli-
cies (Wampler, 2000). Fifth, what mechanisms should be used to select citizen
representatives? Finally, as a decision-making tool, should PB be adopted by
the legislative branch or the administrative branch? All these questions should
be considered carefully while implementing PB.
PFM 11/3 266
2.2 How to Evaluate Participatory Budgeting
How to evaluate PB is indispensable for understanding and maintaining
the quality of PB. There are various ways of evaluating whether it has
achieved the expectation. The approach that evaluates the outcomes from the
perspective of economic efficiency and political democracy is widely used (Li,
2006). Another approach is to account for three perspectives, including how
they “promote public learning and active citizenship, achieve social justice
through improved policies and resources allocation, and reform the adminis-
trative apparatus” (Wampler, 2000: 5). A third approach is to evaluate partici-
patory opportunities in different phases. For example, Medeiros (2007: 157)
uses the participatory procedure as a framework to evaluate participatory op-
portunities of citizens in decision-making.
All of the three approaches point out efficiency alone is not comprehensive
enough to measure the achievement of PB. Additional perspectives—such as
civil society, political democracy, and institutional reform—should also be
taken into account. Although these approaches list many operational details
for evaluation, they are organized in a fragmental way, which blurs the dis-
tinctive status of budgetary decision-making process. Since an essential func-
tion of PB is to let citizens participate in the decision-making process directly,
we recommend a framework from the perspective of budgetary deci-
sion-making to evaluate PB here.
2.3 A Framework of Budget Rationalities
Budgetary decision-making was often evaluated based on the rationality
model found in economics, which often refers to the utilitarian economic actor
or “economic man” (Simon, 1947). But its application to government activities
and budgeting has been widely criticized because it is too narrow and unrea-
listic (Elster, 1986; Buchanan and Musgrave, 1999; Wildavsky, 1964). Dies-
ing (1962) argues that economic rationality is just one of several types of ra-
tionalities, such as technical, social, legal, and political rationality, in deci-
sion-making. Based on Diesing’s concept of multiple rationalities, Richard
Hartwig (1978) develops an administrative rationality model that focuses on
“ideal types” of organizational decision-making with the essential notion that
the activities of organizations necessarily involve multiple types of rationali-
ties.
Thurmaier and Willoughby (2001) point out that “Hartwig’s use of Dies-
ing’s concepts of multiple rationalities has an intuitive appeal for budgeting as
well” (77). In light of their theory, public budgeting involves both efficiency
and effectiveness decisions. Efficiency decisions include economic rationality
and technical rationality, while effectiveness decisions focus on social rela-
tions including social, political and legal rationalities. The public budget is a
267 Wu & Wang
focal point of economic rationalization because it is the point at which the
alternative ends of the government can be compared, and the given resources
are allocated among the alternative ends so as to maximize achievement of the
goal. Technical rationality embodies the efficiency principle to maximize the
output/input ratio, that is, to gain the maximum achievement of a specified end
with given resources. The social facet of budget rationalities usually pertains
to social problems, which involve social disintegration and disharmony. These
problems are often addressed in a largely unconscious manner in the interac-
tions of social members as they attempt to adjust their lives to accommodate
differences in values among subgroups and individuals (Diesing, 1962; Thur-
maier and Willoughby, 2001). The unconscious actions of adjustment and ac-
commodation improve social integration by forming a common set of values
accepted for social members. Socially rational decisions contribute to promot-
ing greater social integration, which develops and strengthens the attachment
of members to common social values. Political decisions are often about who
gets how much of what in the public policy debates. Who gets invited to par-
ticipate in decision-making is the aspect of political decisions that is most sa-
lient to a model of budget rationality. Political rationality is the rationality of
“decision-making structures where members of the decision-making group
share a common set of beliefs and values and commitment to a course of ac-
tion to previous decisions” (Thurmaier and Willoughby, 2001: 86). Effective
decision-making structures should accommodate a plurality of values, views,
and beliefs as well as achieving a unified decision through discussion. Appli-
cation of legal rationality to budgeting is often preliminary and indirect, which
is constrained by laws governing the budget process and those defining pro-
gram responsibilities as well as restrictions from the “rights-based budgeting”
and contractual obligations between an agency and other levels of government,
nonprofit organizations, and private firms and individuals (94).
Ho and Zhao (2008, 2011) adjust the classification of budget rationalities
of Thurmaier and Willoughby in emphasis of four points: (1) economic and
technical rationality of cost-efficiency and effectiveness, (2) social rationality
of social integrity, stability and collective wealth, (3) political rationality of
power allocation and policy supervision, and (4) legal rationality of emphasis
to control and monitor behaviors with laws and regulations. They apply the
model of Thurmaier and Willoughby to study the motives of performance
budgeting reform, and explain that this reform is initiated to solve problems
caused by the unbalanced development of multiple rationalities in the current
budgeting system.
Budgeting is a dynamic process. If the balance among multiple rationali-
ties in the budget system is lost, there would be a series of political, social,
legal or economic problems. Then new policies would be proposed to rein-
force one or several of these budget rationalities so as to solve the resulting
problems and rebalance the budget system. However, this new system would
PFM 11/3 268
be unstable. As the internal factors of the budget system change, more new
problems would emerge, and new solutions would be expected (Thurmaier
and Willoughby, 2001).
Furthermore, these four rationalities are not isolated from each other but
interrelated (Ho and Zhao, 2008). For example, the discussion of value, faith
and ideology involves issues of budgeting politics, which is a consideration of
political rationality. However, it also relates to social rationality, because it
influences the interests of various stakeholders. Similarly, a consideration of
legal rationality is involved if the government is considering how to improve
the efficiency and effectiveness of public expenditure, given that public ex-
penditure not only concerns about how to allocate resources but also the legal
standard to regulate and support the decision. Consequently, changes on one
kind of rationality will impact other rationalities in a chain reaction.
3. CHALLENGES OF CHINA’S CURRENT BUDGETARY SYSTEM
Previous studies (Ma and Hou, 2009; Ma, 2009) provide a good review of
recent budget reforms in China. State finance in China from 1978 to 1999 was
characterized by having “neither effective administrative control within the
government nor legislative oversight of government finance” (Ma and Hou,
2009: s56). Before the budget reform in 1999, government finance in China
was fragmented, mainly revealed in three ways: authority to allocate fiscal
resources scattered in several departments besides the finance department,
off-budgetary finance expanded rapidly, and lack of departmental budgets.
Fragmental authority on budgeting makes governments unable to compile a
budget that embraces all their departmental activities and associated costs.
Aiming at enhancing the financial accountability of the government, the bud-
getary reform initiated from 1999 consisted of three parts—Departmental
Budget Reform, Treasury Management Reform and Government Procurement
Reform. These reforms have begun to set up standardized budgetary formats
and procedures and establish a uniform, centralized budgetary control within
the government (Ma, 2009).
However, even with the rise of the power of the purse facilitated by the
Departmental Budget Reform (Ma, 2009), the people’s congresses at all levels
can still only exercise limited supervisory power over government budgeting.
First, China’s fiscal year starts from 1 January, but the NPC is often held in
February or March, which means the public expenditure in the first one or two
months in a fiscal year is not approved by the people’s congress before its
usage. In addition, final accounts of public revenue at the end of a fiscal year
deviate substantially from the budget plan, partly because of the huge share of
transfers are not included in the annual budget, indicating a weak budget con-
straint by the people’s congresses on local governments at the corresponding
level (Yu, 2010). Second, the people’s congresses do not have the power to
269 Wu & Wang
make amendment to the governmental budget draft, which means there are
only two choices on budget decision-making for the people’s con-
gresses—approve it all or reject it all. The item veto power—signing parts of
the bill while rejecting others—is not granted to the people’s congresses. Third,
an absence of specific and practical instructions for the implementation of
budgetary power in current laws and regulations weakens the effectiveness of
the examination and supervision of the people’s congresses (Ma and Niu,
2007). Fourth, the people’s congresses have the right of imposing supervision
over the budget and final accounts of the governments at the corresponding
level and lower level, but it does not have an independent committee or a me-
chanism to exercise the function. The fact that the justice system is not com-
pletely independent from the influence of the administrative branch also fails
to offer support to improve the supervision function (Ma et al., 2008).
The people’s congresses at different levels are supposed to have the au-
thority to make decisions about the allocation of fiscal funds. As we men-
tioned above, given the fact that they do not have the authority to amend the
budget draft and can only approve or veto the draft as a whole, the power of
distributing budgetary resources is constrained by the government, whose
members are not elected by citizens. Therefore, the extent to which the budget
reveals citizens’ opinions depends on how the people’s congresses execute
their supervision over the government’s budgeting procedures at the corres-
ponding level.
In addition, how deputies of the people’s congresses, who are not subject
to a competitive and open election (Ma, 2009), perform their duties greatly
depends on the self-discipline and professional capacity of deputies. Accord-
ing to descriptions in the Constitution and the Law of the People's Republic of
China on Deputies to the National People's Congress and to the Local
People’s Congresses at Various Levels (National People's Congress, 1992;
2004), their rights and obligations are ambiguous, especially their obligations
between legislative sessions. Attending meetings and collecting public opi-
nions are two essential obligations for deputies. However, absenteeism of dep-
uties from meetings of the people’s congresses happens so frequently that
some cities, such as Guangzhou, issue regulations to punish those who often
flee from the meetings of the people’s congresses (Wang et al, 2011). In con-
clusion, the people’s congresses neither have the essential power over public
budgeting nor incentives to fully exercise their duty of supervision.
4. CASE STUDY: PARTICIPATORY BUDGETING IN WUXI
Wuxi is located in the southern coastal area of Jiangsu province, which is
part of the economically developed Yangtze River Delta in China. It has two
cities, that is, Jiangyin and Yixing, and seven districts, including Xishan, Hui-
shan, Chong’an, Beitang, Nanchang, Binhu and Xinqu, under its jurisdiction
PFM 11/3 270
(Meng, 2010). Wuxi’s innovation of PB began in 2006, with one community
from Binhu district and the other from Beitang district selected as the pilot
sites for PB, involving a total budget of RMB 3 million for capital projects in
2006 (Financial Bureau of Wuxi City, 2006; Finance Bureau of Beitang Dis-
trict, 2006). In 2007, except for Huishan and Xishan, 16 communities in five
other districts, began to implement PB, involving 32 capital projects and a
total budget of RMB 25.06 million. As of 2008, 22 communities in five dis-
tricts in Wuxi had all implemented PB, covering 36 capital projects and a total
budget of RMB 30.63 million (Financial Bureau of Wuxi City, 2008). In the
following sections, we will examine the motivation, participatory procedures,
outcomes and challenges for the implementation of PB in Wuxi.
4.1 The Driving Forces
There are several advantages to implement PB in a local government. First,
it may contribute to ameliorating the relationship between citizens and gov-
ernments. Citizen participation is not only a social obligation but also a way to
obtain social identity (Box, 1998; King and Stivers et al., 1998). There is a
close connection between participation and public trust in government (Wang,
2001). Based on a national survey conducted in the U.S., Berman (1997) finds
out that improving PB in decision-making restores trust in government and
reduces the level of cynicism of citizens. Second, PB is a way of citizen edu-
cation. The procedure of participating in meetings, such as public hearings and
citizen forums, helps citizens to learn more information about government
operation, budgeting and project selection (Ebdon, 2002a; Ebdon and Franklin,
2004; Wampler, 2000; Ma and Luo). By presenting projects to and discussing
them with citizens, some projects recommended by the government, which are
unfavorable to citizens at first, may become their priorities after discussion
(Watson, Juster and Johnson, 1991). A third purpose to implement PB is to
achieve social equality and spur administrative reform and distribute public
resources to poor neighborhoods by incorporating citizens in policy deci-
sion-making (Wampler, 2000).
During the process of public budgeting, different stakeholders have their
own purposes to achieve through PB and may try to create favorable condi-
tions for its implementation. In Wuxi, the driving forces of PB mainly come
from four aspects. First, the support from the leadership of the government is
crucial. The process of budgeting can be regarded as a political process, for
budgeting reform is in close link with political changes, in which political
leaders also play an important role. In November, 2004, Weize Yang, the
mayor of Suzhou city was officially appointed as the secretary of Wuxi’s Mu-
nicipal Party Committee, becoming the first secretary elected by vote of the
Provincial Party Committee. Hence, the new secretary was encouraged by this
form of democracy and would like to integrate the practice of democratic de-
cision-making into public administration (Xu and Chen, 2009). As soon as he
271 Wu & Wang
took office, he launched a “Sunshine Project,” which contained such tasks as
to develop internal democracy of the Party, to use power properly and build
the “Sunshine Government,” and to perform duties properly and be open to the
public supervision. Budget transparency was a pillar in this project. The notion
of PB was in line with the secretary’s sunshine project and thus received his
fully support. With the support of the top leader in command of the Municipal
Party Committee, PB in Wuxi had an opportunity to be implemented with little
resistance from the leadership.
The second important driving force comes from policy entrepreneurs, who
are individuals active and influential in the process of policy making (Eyes-
tone, 1978; Kingdon, 1984; Polsby, 1984; Price, 1971; Walker, 1974). As such
a policy entrepreneur, China Development Research Foundation (CDRF) is a
nationwide organization established by the Development Research Center of
the State Council of the Chinese central government. It received support not
only from leading members of the State Council, but also from the Ministry of
Civil Affairs and the People's Bank of China. Wuxi’s participatory budget
reform was a research project of public budgeting initiated by CDRF in March,
2005, which lasted for two years. The project of public budgeting reform
aimed to promote research of public budgeting, and to attract more attention
and support from the public, the mass media and nonprofit organizations.
CDRF made efforts to facilitate the implementation of PB. For example, it
organized an academic seminar to discuss how to apply PB in China and pro-
vided their suggestions to the government. Then, it organized a visit for the
leaders of the pilot cities to Brazil to learn their experiences in PB. A profes-
sional research and consultancy firm, the Horizon Research Consultancy
Group, was hired to give an objective evaluation on the outcomes of PB. Fi-
nally, thanks to the great support of CDRF, PB in China attracted attention
from many local and international organizations and institutes, such as the
Financial and Economic Committee of the State Council, Research Institute
for Fiscal Science, the Ford Foundation, and the International Development
Research Center etc. (CDRF, 2007).
Third, Wuxi has a historical and cultural background of citizen participa-
tion. Jiangsu province lies in the lower reaches of Yangtze River, occupying an
outstanding coastal location. It bloomed into a famous industrial and commer-
cial center with lots of civil chambers of commerce at least a hundred years
ago. By 2005, the number of registered industrial associations in Wuxi had
reached 288, covering fields of trade, hospitality service, traffic, transportation,
machinery and textile, and gradually extended to industries such as finance,
communication, software and consultancy (Wuxi Committee of China Associ-
ation for Promoting Democracy, 2009). A transformation of governance in
Wuxi is required by the speeding economic growth and growing civil society.
The Wuxi government’s promotion and publicity on “Sunshine Project” makes
it more closely connected with the people, paving a foundation for PB to be
PFM 11/3 272
accepted by the people and Wuxi government.
Fourth, a rapid economic growth and solid fiscal revenue provide PB with
a substantial support. According to the data of Statistics Bureau of Wuxi, by
the end of 2008, Wuxi’s population of permanent residents had reached 6.1
million, an increase of 88% in 5 years, ranking second after Suzhou City in
Jiangsu Province. Its GDP (according to resident population) had increased by
97.6% from 2004 to 2008, 91.8% higher than the GDP growth rate of Jiangsu
Province, which indicated the rapid economic development and urban pros-
perity of Wuxi (Jiangsu Statistics Bureau, 2005-2009; Wuxi Statistics Bureau,
2005-2009). Thus, its sufficient fiscal capacity has enabled Wuxi government
to implement PB and meet citizens’ demands of more and better public ser-
vices.
In sum, the impetus of Wuxi’s PB comes from both the internal need of
local government and external demands of the society. It intends to improve
the rationalities of public budgeting by taking citizen participation into the
budgetary decision-making processes.
4.2 Procedures of Participation
Citizens participate in budgetary decision-making in different forms in
each of the four steps of public budgeting. According to the introduction of an
officer of the Finance Bureau of Wuxi in our interview, there are the following
four steps.
Step one is preparation. A leading group is usually established first, which
includes the leaders of the party and government in Wuxi, the director of the
Municipal Finance Bureau and Chief Executives of the districts, as well as the
heads of other relevant departments. It is set to define the content, objectives,
procedures, methods and approaches of PB and to build up communication
networks and cooperation among various departments. Then the government
uses the mass media to advocate the value of PB and explain the idea of new
policies and projects to residents in order to encourage their participation. This
step is indispensable to increase the number of participants and maintain their
motivation and initiative. In addition, it also serves as a good opportunity to
educate citizens about public budgeting and citizenship.
Step two is project selection. First, the representatives of residents are se-
lected based on neighborhood committee’s recommendation and
self-recommendation rather than an election by all residents. Second, the
leading group drafts a list of candidate projects according to the general re-
quirement for the development of social undertakings and public opinions
collected through neighborhood committees and door-to-door surveys. Then a
meeting of the representatives of residents is organized by the district gov-
273 Wu & Wang
ernment to decide on the priority of candidate projects. Projects will be intro-
duced to the representatives respectively in the meeting, and then the repre-
sentatives vote for their favorable projects. Generally, public funds will be
allocated for projects according to the results of voting.
Step three is project implementation. The budgets will be operationalized
by the line departments with the help of professional agencies, and then be
handed over to the Financial Investment Auditing Institute for evaluation of
feasibility. After that, they are contracted out to private sector vendors based
on the principles of openness and transparency. The implementation of
projects is under the supervision of residents in three forms: intendancy orga-
nized by the leading groups, intendancy organized by relevant departments,
and individual residents. Actually, because these projects are constructed near
or within residential communities and are closely related to their daily lives,
many residents are highly motivated to check on the progress of the construc-
tion work.
Step four is evaluation. After step three, projects are to be evaluated, au-
dited and assessed by financial auditors, resident representatives and relevant
experts. The result serves as the basis to evaluate the efficiency and effective-
ness of the selected projects, and whether the process of PB itself is fair or not.
The distinction between Wuxi’s PB and the current public budgeting
process elsewhere is that PB introduces direct citizen participation into budget
compilation, budget execution and evaluation. Especially citizen participation
in the process of budget compilation in government has profound meaning
because in China’s current budgeting system, the people’s congresses cannot
change the budget draft proposed by the government. In these four steps, step
two is the most important one because it determines what projects will be
granted a budget by voting of residents.
4.3 Evaluation of the Outcomes
Above all, we need to know whether this reform is done in a good faith by
the government, which is not always the case elsewhere (Wang and Van Wart,
2007). The government could easily find ways to manipulate the administra-
tive procedures of such a reform, such as inviting public participation only
after policy determination has already been made, using misleading terms in
the policy debate, influencing the selection of citizen participants, and mini-
mizing the public notice of participation (Wang and Van Wart, 2007). In Wux-
i’s case, PB was implemented in a good faith in that citizen participation was
arranged before making the final decision, a large public event was organized
to encourage more citizens to participate, and participants were required to
receive some training on public budgeting before the voting.
PFM 11/3 274
In 2008, CDRF employed the Horizon Research (HR) Company to eva-
luate the performance of PB reform in Wuxi and Harbin. The HR is famous
for its professionalism and independence in research, which provides services
for marketing research, public opinion polling, policy analysis, and internal
research for government or non-government organizations (Horizon Research,
2011). HR conducted 15 in-depth interviews and a survey with 547 respon-
dents to evaluate PB from four aspects, including citizens’ cognition towards
PB and public participation, process assessment, impact assessment, and en-
vironmental assessment (CDRF, 2009). First, according to the study, about 60%
of the interviewees participated in PB, and the residents showed more interests
in the projects under discussion than the name of PB. Second, in terms of the
process assessment, the residents were satisfied with the communication me-
chanism between the government and the public, the project selection proce-
dure and improvement on financial transparency of the government. Mean-
while, they were less satisfied with the mechanism of electing resident repre-
sentatives and the method of deliberative discussion in the project selection
process. Third, the impact assessment of the survey indicates that PB has im-
proved the efficient and effective use of public funds by improving the per-
formance of government officials, ameliorating the relationship between the
government and the public, allocating money for the projects demanded the
most by the public, and helping the public to better understand policies. Fourth,
PB also has some effects on the administrative environment in that the gov-
ernment becomes more active in policy innovations and more oriented towards
the provision of public services; residents also become more active in partici-
pating in public affairs, and a sense of mutual understanding between the resi-
dents and the government has been enhanced.
Based on our field research and previous studies, such as HR’s report, we
find that, generally speaking, PB in Wuxi has enhanced economic, technical,
social and political rationality of public budgeting but not legal rationality. PB
in Wuxi improves the economic rationality by bridging service demands and
provision. Resident representatives participate in the procedure of project se-
lection in PB to decide on the priority of candidate projects. Public funds are
allocated for projects according to the results of voting by these representa-
tives. Citizen participation helps decision makers to compare and allocate re-
sources across multiple means represented by those governmental projects to
maximize the achievement of multiple ends demanded by the public. Thus it is
likely to contribute to a more efficient distribution of limited budget resources
to the most needed services.
PB in Wuxi also improves the technical rationality of public budgeting by
reducing the cost of projects. Citizen participation in the supervision of project
implementation, including the process of contracting out, is beneficial for lo-
wering the cost of projects. Consent reached through PB also helps to reduce
the administrative cost in coordination. As an official who had participated in
275 Wu & Wang
PB told us in an interview, it was often trouble free to carry out construction
work granted through participatory decision-making, such as road widening
and construction of recreation centers, because citizens were supportive and
always volunteered to supervise the quality and progress of projects.
PB in Wuxi increases the social rationality by cultivating the development
of a civil society. One of PB’s essential functions is citizen education. By col-
lecting public opinions through neighborhood committees and door-to-door
surveys, encouraging citizens to participate in public affairs, and providing
training for them to understand public budgeting, the government provides
more opportunities for citizens to express their different opinions on policy
issues and communicate with the government, interest groups, and profession-
al experts. This process promotes social integration by forming a common set
of values and beliefs that are commonly accepted by members in the commu-
nity.
Direct participation of citizens also increases the political rationality of
public budgeting in Wuxi, given that PB involves more resident representa-
tives in the decision-making procedures. The discussion for the selection of
projects helps to accommodate a plurality of values, views, and beliefs held by
citizens, and to make a unified decision through consensus. However, Wuxi
has not passed any law to institutionalize or consolidate PB; it has made little
contribution to improving legal rationality of public budgeting.
4.4 Challenges in the Participatory Budgeting Reform in Wuxi
Wuxi provides some precious experiences for developing PB in China.
However, it has met a bottleneck in its further development. According to our
observation, the obstacles may not lie in the nature of PB, but in China’s ad-
ministrative and political environment.
First of all, the progress on enhancing legal rationality of public budgeting
is limited. On one hand, PB in Wuxi has not involved legislative. Citizen par-
ticipation is employed in the budget compilation process in the government
instead of the Local People’s Congress where the final budgetary decision is
made officially. It does not have much real budgetary power, because even
with citizen participation, the government decides how much money can be
determined through PB, who can vote and through what procedures. As shown
in table 1, citizens can participate in project recommendation, selection of
project, implementation of project, supervision and evaluation through various
formats, except for the identification of the impact of PB and candidates who
are qualified to participate and vote as resident representatives, which is the
most influential step in PB. This top-down style of policy-making reduces the
incentives for the public to participate (Finance Bureau of Wuxi City, 2006).
PFM 11/3 276
On the other hand, the government only announced some guidelines for
PB rather than institutionalizing it by law. Citizen participation is at the risk of
being manipulated or abandoned at any time, which is detrimental to the de-
velopment of PB in the long term. Zhang (2007) points out that institutionali-
zation is the key to the success of participatory budgeting reform. Only institu-
tionalized democratic participation can effectively prevent PB from being
swayed by leaders’ personal policy preferences. In China, many government
innovative programs were abandoned due to the tragedy of “policies terminate
with the administrative turnover (ren zou zheng xi).” Innovative programs may
often be at the risk of being suspended due to the job rotation of the responsi-
ble person.
A successful evaluation system would effectively improve the development
of PB. However, neither the performance evaluation on projects selected
through PB nor the evaluation on PB itself has been done in a systematic and
professional way in Wuxi. In addition, professional expertise and advanced
technology are often required for the effective implementation of PB.
Long-term planning requires participants to compare the benefits and costs
between different projects under discussion. As cost-benefit analysis is often
technical, it usually takes citizens years to grasp the complexity of the proposed
scheme. Many countries have developed advanced technology to improve the
effectiveness of PB. For example, residents in Washington D. C., U.S. are able
to vote for their preferable programs on Internet. South Africa developed two
technical systems—Ward Committee Systems and Sub-council Participatory
System—to attract more residents to participate in PB (CDRF, 2009). Wuxi,
however, has no such plan to bring in professional analysts or advanced tech-
nology to enhance the effectiveness of PB yet, which may prevent its further
development in the future.
Table 1. Opportunities of Participation and Formats of
Participatory Budgeting in Wuxi
No.
Opportunities of Participa-
tion
Format
Y/N
1
Project Recommendation
Collect the residents’ opinions from the
neighborhood committees and the media.
Yes
2
Identification of the Project
Impact and Qualification of
Participants
Including fund utilization, program design
and selection of resident representatives.
No
3
Selection of Project
Decide how much fiscal funds will be allo-
cated through PB; design the procedure of
participation; and select participants.
Yes
4
Implementation of Project
The resident can participate in this process
on their initiatives.
Yes
5
Supervision and Evaluation
The resident representatives of the
sub-district and district levels vote first on
the project, and the result will be the final
choice of project
Yes
277 Wu & Wang
5. CONCLUSION
Participatory budgeting provides citizens with a precious opportunity to
get involved in policy-making and to regulate the use of governmental power
in China’s non-electoral environment. It helps to add a form of societal control
that relies on an active civil society, in addition to these existing budgetary
controls, to ensure financial accountability of the government (Ma, 2009). Our
analysis of participatory budgeting in Wuxi shows that, although citizen par-
ticipation increases to a certain extent the rationalities of public budgeting
regardless of the limitation under the Chinese context, its effectiveness has
indeed been restrained by China’s contemporary Party-state system. PB in
Wuxi has been implemented in a conservative way—without reforms on em-
powering the citizens and the People’s Congress in the budgetary process—in
order to avoid perhaps the biggest political constraints stemming from the na-
ture of non-election of political leaders in the current political system in China
(Ma, 2007). In order to improve the effectiveness of governmental innovations,
such as PB, in local governments, the government needs to take measures to
provide incentives for non-elected local officials to become more interested in
involving citizens in budgetary decision-making. Complementary reforms in
other processes of the public budgeting system and a fundamental restructur-
ing of the power structure of the state would also be essential.
There are several policy implications concerning the further development
of PB. First, PB should not focus on specific projects only, which may lead to
discordance with a democratic reform in the future. As we can tell from the
case of Wuxi, the changes in the methods and depth of citizen participation in
public budgeting is still limited. Fiscal funds to be decided by citizens mostly
cover a small amount of short-term construction projects and are often deter-
mined within the government itself, rather than being dependent on the evalu-
ation and approval of the People’s Congress. Starting from citizen participa-
tion in making decisions for specific projects is a feasible method to improve
democracy, but it may not be a sustainable way to cultivate the development of
a civil society. The excessive attention on short-term, small and regional
projects may lead to a neglect of long-term and regional strategic planning.
When the interests on specific projects overwhelm citizens’ attention, they
might overlook the importance of obtaining more opportunities of participa-
tion, professional training, institutionalization of the right of participation and
social justice etc. Participants may come and go when their own preferences
are satisfied, which makes it difficult to promote citizens’ self-consciousness
of forming an independent social force. A well-developed civil society does
not come out of nowhere but need to be fostered and cultivated. The govern-
ment should intentionally include in PB deliberations or debates on long-term
and broader policy issues, such as education and environmental protection,
which may greatly facilitate a democratic reform in the future. Second, the
PFM 11/3 278
evaluation of and reflection on PB need to be improved. As shown in pub-
lished materials in Wuxi, the performance evaluations of PB in every district
each year were almost the same from 2006 to 2008, which lacked of a cautious
reflection and systematic evaluation on previous experiences. Questions, such
as why these projects are chosen, whether the residents are satisfied with se-
lected projects, have never been probed. Likewise, the evaluation on adminis-
trative process is too general to answer questions such as whether PB has
promoted the government organization reform, whether it has helped to im-
prove citizen awareness of public budgetary issues, whether it has optimized the
allocation of public resources, and whether it has helped improve social fairness
or justice. Third, institutionalizing PB by law should be accelerated. Only after
that, can the outcomes of PB become legal and be protected by law, which will
strengthen the incentive for citizen participation as well as the rationalities of
public budgeting. Finally, as mentioned above, PB in Wuxi does not involve
direct citizen participation in the People’s Congress or reinforce the budgetary
power of the People’s Congress, which has a greater potential to increase mul-
tiple rationalities of public budgeting. It could be a new orientation for PB in
Wuxi to pursue in the next step of its reform.
This analysis only serves as an initial start to study participatory budgeting
in China. More future research in this area is necessary to not only examine the
benefits of the participatory process itself, but also the link between citizen
involvement and the performance of public budgeting. The accumulation of
such empirical studies will contribute to the theory development for PB.
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