There is no doubt that the reform of both the central and local governments' revenue and spending system is of significant importance and the same should be accelerated.

However against the backdrop of the economic downturn in China, the aforesaid reform might be hindered.

This is particularly so for the local governments. Faced with three increased risks, namely fiscal risk, regional financial risk and social risks, the local governments often expect and demand the aforesaid reform to deliver result immediately.

However, the reform of fiscal system will not have immediate result, and during the course of the reform, the local governments will see immediate impact on their worsening fiscal situations.

ANBOUND Consulting is of the view that in these two years, the aforesaid reform might not have any apparent effect.