How to balance the books

Reform of tax distribution system needed to overcome local governments' dependency on land sales and loans

The year 2012 is crucial for China to solve its local government debt problem. Because it directly relates to the division of taxation between local and central governments and concerns the financial balance of governments, reforming the current finance and tax system is the only solution.

Statistics indicate that about 43 percent of the 10 trillion yuan ($1.57 trillion) government debt, around 4.6 trillion yuan, matures between 2011 and 2012. So a large financial gap may appear this year.