Objective With escalating health expenditures and increasing health needs, improving health system performance has become imperative in China and internationally. The objective of this study is to examine the efficiency of China’s health system and to understand the underlying causes of the variation in efficiency across provinces.

Setting A system-wide perspective is adopted, focusing on performance in maternal health, child health and non-communicable diseases (NCDs) in the 31 provinces of mainland China during 2015.

Methods Analyses were performed using bootstrapping data envelopment technique. Health outcomes were measured by infant survival rates, maternal survival rates and healthy life years calculated only considering NCDs. Health inputs were measured using health expenditure, and density of medical personnel and hospital beds. The model also examined the impact of environmental factors on health system efficiency.

Results Due to wide-spread scale inefficiency in the country, the average bias-corrected overall technical efficiency (OTE) was 0.8022 (95% CI values ranging from 0.7251 to 0.8492). Socioeconomic status, hospitalisation rate and share of out-of-pocket expenditures were significant determinants of OTE. Nearly 60% of the provinces operated at a decreasing return to scale, meaning that a gain in efficiency could be achieved only through downsizing the scale of operation.

Conclusions Given the pervasive nature of diminishing returns across provinces, health policy makers must explore the optimum operational scale which is people-centred and focused on prevention, rather than on treatment, of diseases. Moreover, due consideration should be afforded to social determinants of health and health financing arrangements to complement health-sector based reforms and meet the ambitious goals of the Healthy China 2030 Plan.