China’s budgetary system, including intergovernmental fiscal relations, has been actively evolving for several decades in the context of the nation’s socio-economic reforms. The country has been steadily moving from a rigid centralized system to a system with elements of fiscal federalism. This paper describesthe movementofChina from the highly centralized budget system, in which it was impossible to speak about any significant fiscal autonomy of sub-national governments,to experimentswithfiscal autonomy of the regions and with the organization of intergovernmental fiscal relations, and finally to the adoption of the foundations of the current tax and budget legislation. Turning to the present situation, the paper documents main characteristics of the system of intergovernmental fiscal relations during the last two decades, its problems and development trends, and possible lessons for Russia. When analyzing the relations between the center and the provinces it is possible to observe a differentiated approach to the three groups of regions (cities under the central government, national autonomies and other regions), which is of interest from the point of view of improvement of the Russian system of intergovernmental budgetary relations. Current situation with subnational finances in China is the result of a series of experiments and for all its ambiguity is indicative of certain achievements in terms of providing incentives for subnational governments to expand the revenue base and in terms of the efficiency of the policy of budget transfers.