A dilemma faces local government finance in China now, said an article in China Business News) excerpts below).

When structural tax cuts become a must for local governments it is hard to implement proactive financial policies. Declining revenue means less spending power.

The government needs to invigorate its stock and unused financial capital and improve the efficiency of its financial input.

Reforming State-owned enterprises reform also provides a channel to market assets.

Keeping a good balance of tax cuts, increasing government input in public services and controlling the deficit is the best solution to the dilemma.