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China's current health system reform (HSR) is striving to resolve deep inequities in health outcomes. Achieving this goal is difficult not only because of continuously increasing income disparities in China but also because of weaknesses in healthcare financing and delivery at the local level. We explore to what extent sub-national governments, which are largely responsible for health financing in China, are addressing health inequities. We describe the recent trend in health inequalities in China, and analyse government expenditure on health in the context of China's decentralization and intergovernmental model to assess whether national, provincial and sub-provincial public resource allocations and local government accountability relationships are aligned with this goal. Our analysis reveals that government expenditure on health at sub-national levels, which accounts for ∼90% of total government expenditure on health, is increasingly regressive across provinces, and across prefectures within provinces. Increasing inequity in public expenditure at sub-national levels indicates that resources and responsibilities at sub-national levels in China are not well aligned with national priorities. China's HSR would benefit from complementary measures to improve the governance and financing of public service delivery. We discuss the existing weaknesses in local governance and suggest possible approaches to better align the responsibilities and capacity of sub-national governments with national policies, standards, laws and regulations, therefore ensuring local-level implementation and enforcement. Drawing on China's institutional framework and ongoing reform pilots, we present possible approaches to: (1) consolidate key health financing responsibilities at the provincial level and strengthen the accountability of provincial governments, (2) define targets for expenditure on primary health care, outputs and outcomes for each province and (3) use independent sources to monitor and evaluate policy implementation and service delivery and to strengthen sub-national government performance management.

China launched its new health system reform plan in 2009 to advance its universal coverage of healthcare, after more than 4 years' consultations and discussions with various stakeholders including the public. This paper aims to introduce and discuss the context and process of China's current health system reform and analyse how political will in China has been translated into policy practice over the past decade. The paper also shares the insights of World Health Organization's contribution to China's health system reform, as the authors advised the Chinese government on the reform options and process. Furthermore, the paper describes and discusses key challenges in the implementation of the reform plan over the past 3 years and draws lessons for other countries.

David Hipgrave and colleagues discuss health system reform in China and argue that parallel reforms in governance, financing, and accountability are also needed to ensure health equity.