revenues from school-selection fees and hospital registration and service fees, further exacerbating the inequities in the allocation of public resources. Moreover, financing constraints in schools – particularly in so called “ordinary” schools – have contributed to the obstacles in access to schools facing migrant children and to quality deficiencies in schooling of many, both migrant and officially registered, poor children in cities.

# **_The problems in health financing have been even harsher and rightly on the government_**

**_agenda for its health sector reform plan_** (as announced in 2008).  Underinvestment, inequities and inefficiencies in the allocation of public resources (coupled with inappropriate provider payment system discussed below) have brought about under-provision of essential public health functions and services, and basic clinical care also within cities, and often poorly functioning community health centers that have generally served the poor in urban areas.  The inadequacy of public resources in health has compromised the delivery of essential public health functions, public health services and essential clinical healthcare to the poor in cities.

**_The underinvestment in water distribution networks has been causing frequent delivery problems and water contamination in old pipes_** .  In the surveyed cities, bursts in water distribution networks have typically occurred two per km per year, which is about 10 times the level observed in European cities.  In fact, urban water distribution networks in the surveyed cities require relatively low investment and maintenance per capita since population density in cities is high and pipe-work per capita lower than in an average European or US city.

**_The inequities in public resource allocation and public service outcomes have largely reflected the deep decentralization, down to the level of districts and counties within cities, in the assignment of responsibilities for financing service delivery in China_** .  Compared to international practice, a relatively very low share of financing responsibility for basic public services has been shared by the provincial and central government.

**_The challenges in public resource allocation for essential public services within cities seem less urgent than they are in rural areas and nationally_** .  Survey analysis and case studies, however, suggested that they are real, unnecessarily exacerbating income disparities, and giving rise to social unfairness and to citizens’ dissatisfaction.

**_Some cities have successfully adjusted their public spending programs to address the needs_**

**_of the disadvantaged population groups_** .  Successful experiments have helped ensure appropriate resources for public services at the municipal level.

**_Dalian’s municipal policy to equalize funding per students in all schools across city districts and to finance standardization of educational capacity of schools has helped improve equity and quality in service delivery in schools in at least across Dalian’s four city districts_** .  Furthermore, Dalian has mandated substantive fiscal transfers from the municipal government to its three (rural) county towns with the objective to achieve provincial standards for basic schooling in all schools within the municipality.  Dalian’s initiatives in basic education have contributed to equity in access to primary schooling and to

32