Monday, August 17, 2009

Chongqing Cabs and Municipal Budgeting

Anonymous reader raised an interesting point: "I have to say its not very logic to link the gangster investigation and Chongqing's bankruptcy together. The additional CNY1500 income from taxi driver even can't afford the interest from Chongqing government's CNY1 trln debt. However, it is true that the government will make some "action" if it finds out someone not following its order.But I think every government around the world will make similar decision, right?"

Let's do some math: 1500/cab/month*12=18000/cab/year. Let's say there are 3000 cabs in Chongqing. This would make 54 million in additional income per year. Now, that's not a large amount, but it can pay interest on a much larger loan. As a government, Chongqing can borrow cheaply from banks, probably in the 5-6% interest rate loan. An additional 54 million in income would allow Chongqing to take out a loan worth 900 million RMB. Now we are talking about somewhat real money. Also, most local governments would not even try to impose such a fee on mafia controlled taxi companies. They would prey on normal residents. Chongqing, due to the connections of the party secretary, can do both.

In Mexico City theCity Government politicians run an informal tax scheme on "unregistered" taxi drivers. The amount of cash is astounding and is used to finance political schemes and other illegal activities. Basically the official government is financing itself off of a secondary shadow government scheme exploiting taxi drivers. I would not be surprised to learn that the same thing has happened in China. Its not gangsters--but bag men for government officials that made the whoel thing function.
the troubling hole is just getting more and bigger under the unique conpelling “net” in China's everywhere. poor majority little people.
Dear Professor,

I'm just feeling somewhat confusing about the centralization or decentralization by China's technocrats faction during this economic crisis compared to the Asian Financial Crisis. Actually the technocrats faction basically made the decentralization decision since this crisis, rather than centralization as those did in Zhu's team, referring to the logic in your book.

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