How to reform China’s fiscal system?

Abstract

ABSTRACT As the population aging, China’s government expenditures, including general fiscal expenditure, healthcare and social security expenditure, will grow more rapidly than government revenues, tending to elevate government debt. Local governments undertake overwhelming 85% of total general fiscal revenue and are responsible for healthcare and social security, and their debt has been growing. Fiscal reforms are imperative, including tax reforms, the structure of government spending reforms, social security reforms, healthcare reforms, local public finance reforms, and central and local government’s fiscal relationship reforms. This paper will explore the fiscal challenges China faces and discuss how to reform the fiscal system to cope with these challenges.