China’s experiences during the reform and opening-up era have presented a novel model for the government to efficiently promote growth and manage fluctuations. As China’s economy enters a new era of high-quality development, how should the government proceed to boost structural transformation and promote steady growth? To answer this question, the paper presents a multi-sector dynamic general equilibrium model with government spending structure, based on the facts that the structural composition of government spending is different from that of private consumption or investment. The model is applied to China’s economy to estimate the effects of government spending on structural transformation through the mechanism of demand structure. It is found that a decrease of government spending or an increase of government investment rate would increase the share of industry and improve the structure of services, with the effects of the former being more significant than the latter. The paper offers a theoretical basis for China’s reform of government spending structure, and derives policy implications for the government to further promote high-quality development.