China has made significant progress in the last decade in sustaining and broadening its economic development, in continuing to raise living standards, and in enhancing its status in the international community. Improvement in the institutional capacities of government to further promote these goals has become a key priority. One important policy direction laid out in the 12th FYP (Fiscal Year Plan) is to improve the provision of basic public services – notably public education, healthcare and social security – by undertaking more effective institutional reforms and defining more clearly the responsibilities of different levels of government. The FYP goes on to state the government’s intention of deepening fiscal reform through improvements to transfer payments, budget management and tax systems. While China has made progress in these areas, it can do more to streamline administrative efficiency and to accelerate budgetary reforms.