Abstract: It is supposed that fiscal decentralization under provincial level can solve financial difficulties at grass roots caused by the asymmetry between local government’s financial power and administrative power. Since 2002, Fujian province has been carrying out the provincial fiscal decentralization reform, providing advanced experience for China’s financial system reform under provincial level. Through the analysis of the basic conditions of financial development at different levels in Fujian province after the reform, it can be concluded that under this mode the provincial fiscal decentralization is not sustainable; besides it is difficult to solve grass-roots financial difficulties and the problems of regional differences. Under current conditions, it is not mature yet for China’s financial system under provincial level to move towards fiscal decentralization. To improve the ability of macroeconomic regulation and control at the provincial level and to replace the decentralized mode with distributing revenue should be the direction for future reform.

Key words: financial system under provincial level; fiscal decentralization; grass root fiscal difficulties; transfer payment