Rapid urbanisation in the reform period has resulted in a very high demand for basic urban infrastructure in China. Improving its provision by the public sector is a challenge as problems persist in the form of unmet demand, deficiencies in cost recovery and inadequate maintenance. Institutional hurdles, particularly the lack of organisational and financial autonomy for the providers of urban infrastructure, are in part to blame. Urban construction authorities have yet to rid themselves of political interference and overlapping responsibilities. But measures have been taken to reform the institutional environment. Specifically, increasingly decentralised central-local fiscal relations are allowing municipalities an unprecedented degree of freedom for resource mobilisation through a wide range of mechanisms that greatly expand extra-budgetary revenue. A case study of Shanghai's reform efforts shows that results can be immediate and promising.
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