Fiscal Equalization and Intergovernmental Transfer System Optimization in China

The result of empirical study indicates that the jurisdictional disparity of fiscal capacity in China has been enlarged in the recent years although the total amount of central government grant has increased with the development of economy.The defects of intergovernmental transfer system that is a main means of equalization contribute to this phenomenon.It is necessary to construct an equalization transfer system,forgo the grant made up mainly of tax repay and earmarked fund,set a minimum amount for central government to allocate funds and made appropriate adjustment according to regional fiscal capacity and feasible political environment.