# **2. Governance Challenges in Urban Service Delivery**

**_The analysis of survey results and case studies has underscored the validity of the government’s effort to enhance equity and quality in public service delivery_** .  The analysis revealed that wide disparities exist in access, utilization, fees and quality of public services by population group, jurisdiction of providers, and by district/county within cities.  These problems are not surprising given the massive changes in the urban economic and social landscape that underpin China’s fast advancement.  Transforming the service delivery system so as to be responsive to the needs of the disadvantaged population groups and flexible enough to accommodate the increasing labor mobility is not an easy task in any country. Making public services work for all is especially difficult in the context of the fast economic and social transitions and extensive decentralization that occur in China.  The Chinese government has rightly recognized the importance of public services for sustained economic and social development and, accordingly, has been adjusting national policies and encouraging local governments to promote equity and quality in public service delivery.

**_Building on the survey analysis and case studies, this chapter explores the institutional challenges facing China in urban service delivery_** .  The chapter highlights the financing arrangements and accountability relationships that lie at the core of the existing constraints in terms of equity in access and quality of essential public services.

## **_2.1 Financing service delivery_**

**_Performance in public service delivery is largely determined by the financing system and by the associated incentive structures at the level of local governments and service providers_** .  This section explains that the challenges in public service delivery in the five surveyed cities reflect particularly the nature of China’s intergovernmental fiscal system.  In addition, especially in health, the nature of the provider payment mechanism has a strong impact on equity, effectiveness and quality in health care.

### **Public finance for service delivery**

**_At the national level, the government has been already addressing the under-funding, inequities and inefficiencies in the allocation of public resources for essential public services, problems that have been documented in numerous studies_** .<sup>13</sup> Over the past decade, the government has adopted policies to address some of the inadequacies, inequalities and inefficiencies in the allocation of public resources for the delivery of basic public services at the national level, targeting regional inequities through its “Go West” strategy, the basic needs of the poor through the national policy alleviation strategy, and the rural-urban

> 13 See, for example, WHO/UNICEF/UNFPA(2006), _Joint Review of the Maternal and Child Survival Strategy in China_ , and Wang Xiaolin and Mei Hong (2006) _China’s Budget System and the Financing of Education and Health Services for Children_ (UNICEF-NWCCW) _._ For data, see also the annual China National Health Accounts reports by the China Health Economics Institute.

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