China's State Council released on Sunday a regulation on government investment to deepen the reform on the country's investment and financing mechanism and enhance law-based administration.
The regulation, made public through a State Council decree signed by Premier Li Keqiang, will go into effect on July 1.
It clearly defines the scope of government investment to ensure the investment focuses on key areas and goes where it is targeted.
Government investment or fixed-assets investment using budgeted funds is a significant function of the government, which bears on overall economic development and plays an important role in implementing national development strategies and driving up social capital investment, according to a joint statement by the Ministry of Justice and the National Development and Reform Commission.
It is also essential in preventing risks, improving the weak links in national development, optimizing supply structure and increasing the country's development potential, the statement noted.
Clear-cut investment scope
According to the regulation, government investment should be channeled to the public sectors where resources cannot be effectively allocated by the market, and mainly target non-operational projects.
As government investment concerns the relations between the government and the market, the government must "know what to do and what should not with its investment" and "eliminate inefficiency, waste while avoiding scrambling for profit with the people," the statement explained.
These public sectors, it said, include social services, public infrastructure facilities, agriculture and rural sectors, ecological and environmental protection, significant technical advancement, social management, and national security.
To optimize the scope and structure of government investment, the regulation says a mechanism of regular assessment and adjustments will be established.
No vanity projects
The regulation also clarifies major principles and basic requirements of government investment, stressing the need of making rational investment decisions, having standardized management, being result-oriented, staying open and transparent as well as aligning with economic and social development and public finance.
In addition, the government and relevant departments are prohibited from raising investment funds through illegal borrowing and should treat all investors equally when allocating government investment funds.
The regulation also stipulates and optimizes the decision-making procedures for government investment, standardizes the approval mechanism for government investment and consolidates the binding effect of investment estimates.
Vanity projects and provisional investment ideas must be prevented, according to the statement.
For major projects, procedures such as evaluations by intermediary service agencies, public participation, expert assessment, and risk evaluations must be performed, the regulation stipulates.
It also sets requirements on making annual plans on government investment and tightens the supervision both during and after the implementation of relevant projects.