Objective To analyse the main policy of health system reform in China in recent years, and explore the development path in future. Methods The methods of literature review and policy analysis were employed to study the main policy of health system reform in China in recent years. Results Government pricing played a dominating role, which was the fundamental cause for the ineffectiveness of price mechanism. The findings from 16 pilot cities indicated that the reform of public hospitals had not made a significant breakthrough. Conclusion It would be a practical way to establish the mechanism of medicine price formation to solve the current problem, and the key to reform of public hospitals lies in the socialization of medical resources.