Chapter 12 analyzes how China’s pro-growth tax system and expenditure system, the expansionary fiscal policies, and local government fiscal expansion outside formal budgets have stimulated China’s economic growth in recent decades. It discusses China’s growth perspective and shows that China may become the largest economy in the world in less than a decade. It also exposes the challenges that China faces, such as income inequality, environmental degradation, resource depletion, slowing down economic growth, and the population aging. It finally discusses fiscal reforms needed for equitable and sustainable economic growth, including reinforcing environmental and resource tax laws, curtailing government debt, stimulating private investment, raising transfers to low-income families, and increasing government expenditures on education, healthcare, and welfare.