In both countries, the early years of transition were associated with fiscal
decentralization. In each of the transition economies, fiscal decentralization was a central
piece of economic policy reform, for, as reforming economies became more
decentralized and market-based, the public finances became the primary instrument for
supplying public goods, protecting vulnerable members of society, and maintaining
growth and stability. Yet, while fiscal decentralization fostered rapid growth in China, in
Russia, de facto fiscal decentralization had dire consequences.