This paper takes the fiscal system reform of“Province-Managing-County”as a natural experiment，and，based on national county panel data，constructs the“counterfactual”state by using the PSM-DID method that can effectively correct the selection bias problems，and assesses the average treatment effect of the reform on the county government fiscal capacity．The results show that the reform increases per capita fiscal revenue of the county government，but reduces per capita transfer payment; the decline is relatively large，thus lead to a decrease in per capita total fiscal revenue．Hence，the reform of“Province-Managing-County”not only fails to improve，but to some extent worsens a county’s financial situation．The average treatment effect in the East and Central regions is similar to that of the whole nation，and the above conclusions are robust．In addition，a test on the impact mechanism is conducted．The fiscal competition between a prefecture-level city and a county、between counties，and the coordination mechanism of province to cities and counties all influence the effect of the financial system reform to a certain extent．