Translated from 21st Century Business Herald

The State Council issued the first national plan for public services on July 19. The government will beef up efforts to improve basic public services and promote equal access to these services for all people during the 12th Five-Year Plan (2011-15) period.

This plan is a milestone in its field because it stipulates for the first time basic public services in terms of contents and categories for each Chinese citizen. It means at least that all Chinese, especially the poor, know how many kinds of public services the government should provide for them.

Local governments are the direct service providers. But the fact is their revenues, or their share of local tax plus the other forms of income — for example, income from land transfers — are probably not enough to pay for the services they are in charge of.

Many argue that China should reform its tax-division system between central and local governments to give local governments more money to do their jobs.

This plan is believed to convey a signal from the central authority that it will not likely increase local governments’ share of tax revenue. An equal national standard means the central government will necessarily transfer its revenues from rich provinces to aid the poor regions to ensure local residents enjoy basic public services according to the plan.

So the central government still prefers improving its transfer payments to carrying out a new round of tax-division reform. This is an important choice reaching far beyond the field of public service, but also China’s economic structure transformation.

This choice may save a lot of immediate troubles. Yet it poses greater challenges for the central government in the future in the allocation of national resources to deal with expanding demands for public service from an aging society going through fast urbanization.