The reform of public service institutions in China should be based on the nation's overall tendency toward a second transformation and reform aimed mainly at promoting equality and sustainable development in the coming five to 10 years.

After 30 years of reform and opening-up, the scarcity of public goods has replaced shortage of privately produced ones as one of the most prominent social contradictions, and it is an important manifestation of people's increasing demand for better development.

Public service deficiency is the main factor motivating China's growth pattern transformation and reform of public service units. How to attune such a reform to the basic development trend in future demands more attention.

To resolve the contradiction between a rapid increase in public services and their insufficient supply, is fundamental to raising Chinese citizens' consumption rate.

Advancing the reform of public service institutions to improve the quality and equality of public services is an important strategic measure to resolve social conflicts, remove causes of social crises and promote the construction of a harmonious society.

The existing government-funded public service units (PSUs), or shiye danwei, are the major public service providers in China. They mainly concentrate upon areas such as education, healthcare, scientific and technological research, and culture, which are responsible for enabling all members of society to equally make use of basic public services facilities.

Currently, the main problem is that, due to some imperfect reforms and certain deviations in practice, many PSUs, such as schools, hospitals and research organizations, have a strong incentive to pursue their own interests. Renewing the public welfare nature of PSUs by promoting their transformation and reform is key to improving the quality and efficiency of service delivery and establishing a sound public service system.

In the face of public service shortages, the old system formulated in the planned economy era, in which the government takes responsibility to run everything, should be replaced by a diversified public service delivery system.

First, more suppliers should be introduced so as to use incremental measures to drive reform, as introducing external competition will help transform traditional PSUs.