Reforming China's institutional environment for urban infrastructure provision

Rapid urbanisation in the reform period has resulted in a very high demand for basic urban infrastructure in China. Improving its provision by the pub lic sector is a challenge as problems persist in the form of unmet demand, deficiencies in cost recovery and inadequate maintenance. Institutional hur dles, particularly the lack of organisational and financial autonomy for th e providers of urban infrastructure, are in part to blame. Urban constructi on authorities have yet to rid themselves of political interference and ove rlapping responsibilities. But measures have been taken to reform the insti tutional environment. Specifically, increasingly decentralised central-loca l fiscal relations are allowing municipalities an unprecedented degree of f reedom for resource mobilisation through a wide range of mechanisms that gr eatly expand extra-budgetary revenue. A case study of Shanghai's reform eff orts shows that results can be immediate and promising.