Abstract:Since China adopted its reform on tax sharing system, there emerged significant differences among local governments regarding financial capability and operation,which was reflected from the scale and structure of financial revenue and expenditure, financial revenue and expenditure gap, financial self-sufficiency rate as well as the equalization of basic public services. It is closely related with the differences in economic development, problems within the tax sharing system and in transfer payment system between regions. Therefore, this paper proposes several policy suggestions on how to promote the relative equality of financial operation among regions and realize the equalization of basic public services,including flatting reform of governmental levels in order to ensure sources of local governments' financial revenue, improving financial and taxing management system moderately inclined to the central and western regions and perfecting intergovernmental financial transfer payment system to support the central and western regions.