Abstract: Adjusting the relationship between central and local financial power and improving the efficiency of local fiscal expenditure are not only important means to alleviate local debt risks and improve local governance methods, but also an important part of the deepening fiscal-system reform for national governance modernization. Starting from clarifying the theoretical logic of how vertical fiscal imbalance affects the efficiency of local fiscal expenditure and how fiscal transparency regulates this relationship, this paper conducts an empirical analysis based on panel data of Chinese provincial governments in the period of 2010-2019. The research shows that the current fiscal vertical imbalance promotes the efficiency of fiscal expenditure to a certain extent, though with regional differences, and fiscal transparency can positively adjust the impact of the degree of fiscal vertical imbalance on the efficiency of fiscal expenditure. Therefore, the efficiency of local fiscal expenditure should be improved by tightening budget management system, strengthening public supervision and information disclosure, and adjusting the incentive mechanism of local officials.

Key words: fiscal vertical imbalance, fiscal transparency, local fiscal expenditure efficiency, adjustment effect