Abstract: Since modern times, dramatic changes have taken place in traditional system of China, driven by many factors such as the process of urbanization and the construction of grass-roots political power. Consequently, even the layers of local governments increase to the level of four, and the types of administrative zones and management system are diverse and complex. The result of this long-term institutional evolution is the basis for our discussion on intergovernmental fiscal relations. Therefore, in a country which owns a large population and vast territory as China, it is time to take measures to adapt to the local conditions, allow multiple fiscal systems to coexist, and adjust fiscal expenditure responsibility according to the factors such as administrative division scope and social economic development of local governments at all levels. In the next stage, the power of local government in our country needs moderate decentralization, while the responsibility for fiscal expenditure needs to be appropriately collected.

Key words: governance of great country, local public finance, the hierarchy levels of local public finance, tax-sharing system, expenditure responsibility