Measuring and Benchmarking Fiscal Health: A Study of Chinese Provincial Governments

Understanding the fiscal health of local governments is crucial for sound fiscal decision-making processes and prudent fiscal management across the globe. To generate knowledge about fiscal health in an international context, this research establishes a four-dimensional framework to conceptualize and measure the fiscal health of Chinese local governments, considering China's unique political and fiscal institutions. The study generates an aggregate fiscal health index and finds that its four components are strongly correlated with local socioeconomic conditions. With these measures, local government officials can conduct financial analysis, develop fiscal planning activities, and aid in designing and implementing fiscal resilience strategies.