This study examines the impact of fiscal decentralization on economic growth in China since the late 1970s. The authors find that a higher degree of fiscal decentralization, particularly in terms of provincial budgetary spending, is associated with lower provincial economic growth over the past fifteen years. This finding is surprising given the conventional wisdom that fiscal decentralization typically enhances local economic growth. The study uses provincial panel data from 1978 to 1992 to test the impact of different levels of government spending on economic growth. The results are robust across various specifications and sample periods, suggesting that the negative association between fiscal decentralization and economic growth is consistent and significant. The authors attribute this finding to the current stage of China's economic development, where the central government faces constraints in public investment due to limited resources, and key infrastructure projects undertaken by the central government have a more significant impact on growth across provinces. The study also highlights the implications for other developing countries and transition economies pursuing fiscal decentralization, emphasizing that the benefits must be weighed against existing revenue and expenditure assignments and the stage of economic development.This study examines the impact of fiscal decentralization on economic growth in China since the late 1970s. The authors find that a higher degree of fiscal decentralization, particularly in terms of provincial budgetary spending, is associated with lower provincial economic growth over the past fifteen years. This finding is surprising given the conventional wisdom that fiscal decentralization typically enhances local economic growth. The study uses provincial panel data from 1978 to 1992 to test the impact of different levels of government spending on economic growth. The results are robust across various specifications and sample periods, suggesting that the negative association between fiscal decentralization and economic growth is consistent and significant. The authors attribute this finding to the current stage of China's economic development, where the central government faces constraints in public investment due to limited resources, and key infrastructure projects undertaken by the central government have a more significant impact on growth across provinces. The study also highlights the implications for other developing countries and transition economies pursuing fiscal decentralization, emphasizing that the benefits must be weighed against existing revenue and expenditure assignments and the stage of economic development.