Local governments in China are spending more money than they can sustain. However, most of them can make changes to manage their finances better. The amount of money the central government gives to local governments affects their financial health. When the central government gives more money to places that need it most, it helps those places stay financially stable. But when the central government gives money to places that don't need it as much, it can actually hurt their financial health. These findings are strong even when looking at different ways of analyzing the data.