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Public Goods Provision in China---Current Situations and Recommendations

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Public goods provision in china---current situations and recommendations 1. Definition of public goods
According to public economics, social products are divided into public goods and private goods. The former has been divided into pure public goods and quasi-public good.The pure public goods are these social products having complete non-competition andnon-excludability features.

Non- competition means that an individual’s consumption on public goods will not hinder others’ consumption on public goods; non-excludability means that public goodsconsumption can’t exclude the non-payers or the exclusion is given up due to its high cost. Quasi-public goods are these social products with incomplete non-competition and on-excludability. Private goods refer to the social products occupied and enjoyed by individuals and have competition and exclusiveness.

Because of this feature of public goods, free riders occur and result into market failure. Thus the invisible hand cannot reach the Pareto efficiency of public good market, which means the government needs to arrange for the provision of public goods.

2. Current situation in China
China has experienced many times of explorations and practices in provision of public goods. Before the reform and opening up, our country implemented a pure planning economy mechanism. During that time, our central government was responsible for the whole supply of both public goods and private goods in China, which turned out to be a very wrong decision. Since 1978, the provision of private goods is no longer controlled by the government. However, the central government still supplied all public goods. In 1980, local governments, who knew better of local demand of public goods, took part in the provision of public goods.

For a long time, the practice of Chinese public management has been predominated by the traditional public management theory, through which people think the public goods can only be provided by government. While today, during the comprehensive public management of the government, the factually limited management resource is turning to be more and more insufficient. Such result is definitely contrary to the original design of traditional public management theory in which the government management on public good should ideally promote the usage efficiency of public resource.

Actually, government is still the monopoly of public goods today in china. Because of the strict government regulation, abundant of private capital and foreign investment cannot reach the public good market. This one fold monopoly provision do not only cost vast property but also put public into a condition with an extreme shortage. In order to pursue own achievements and benefit, all levels of policymakers always prefer these public goods with short-term profit and obvious political achievement, such as various target-reaching activities and well-off projects, to the long-term and recessive public goods, such as medical health and environmental protection and also prefer visible and obvious “hard” public goods, such as water facilities subject to inspection,and traffic & road construction to the “soft” public goods, such as promotion of agricultural research. With a lack of competition with out of the government, officials often lack efficient encourage, leading to low efficiency of supply. Doing not need to worry about the qualities of public goods as a monopoly, government often provides low quality products and services. This also hurt the image of the government. Such a one fold supply mechanism keeps down competition, lower the efficiency and blocks the technology development.

3. Recommendations
Presently, China is developing on a historically important transfer from traditional planned-economy to the marketing-economy, and the research of public goods system will obviously bring many practical effects to China. The past choice standards and methods cannot meet the social demand any longer, and now, we must confidently and intelligently face to the challenge of advancing the reformation of public goods supply system in the new social conditions.

For these reasons, we must consider a diversified supply mode to break down the government’s monopoly of public goods. For our country, we should sufficiently know the superiority of government and market and reasonably allocate resources to realize the utility maximization of provision of public goods. Widening the supply channel of public goods to allow some private provision of public goods can not only loosen government’s financial burden but also improve public benefit.

Changing the function of government from provision to macro control of the supply of public good can balance the marketization and stable supply of public goods. On the other hand, gradually exiting the supply, government can have more time and power focusing on other things, for example, the establish of law of provision of public goods. Only by having a sound law system of public goods provision, can guarantee a sound supply of public goods.


Harvey S. Rosen. (2012). Public Finance. Beijing. TsingHua.

Ming Yang. (2010). Thinking about public goods. Corporation economy and technology. 7: 107-110

Wei Guo (2005). Dilemma of public goods supply in China. Economy research. 11: 23-25…...

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