A cashier at a bank in Taiyuan, Shanxi province counts renminbi notes. (Photo: China News Service)
China announced revised regulations on Friday to implement the new version of the Budget Law, which will take effect on Oct 1. The move underscores the authorities' goals of tightening budget management and curbing risks in local government debt, according to the Ministry of Finance.
The new regulations clarify the specific income and expenditure items in the government's four budget accounts: the general public budget, government fund budget, the State-owned capital operating budget and the social insurance fund budget. That will make budget management work clearer and more transparent, analysts said.
The revised rules will also help to build a sustainable modern financial system that optimizes the allocation of fiscal resources and supports long-term economic and financial stability, they said.
The general public budget, which comprises tax and nontax revenues and expenditures, can transfer a part of its funds to finance the social insurance fund account. Also, the State-owned capital operating budget, which remits profits of nonfinancial central State-owned enterprises, is allowed to move funds to the general public budget, according to a document released on the ministry's website.
The authorities also urged the establishment of a risk assessment system for all local government debt to warn regions with high debt risks. Measures are needed to supervise the process to resolve risks involving local government debt, the document said.
The revised regulation also allows the central government to transfer loans from foreign governments and international organizations to provincial-level local governments.
"New regulations are conducive to building a standardized debt financing system by local governments, which will further tighten debt management, helping to prevent and resolve debt risks," Finance Minister Liu Kun said on Friday.
The world's second-largest economy enacted the first phase of its budget reform in 1994 with the debut of the nation's first budget law. It had two major goals: raising overall fiscal revenues and reallocating revenues through a "tax-sharing system" between the local and central governments, analysts said.
China's second major fiscal reform arrived in 2014, through an amendment to the Budget Law of 1994. One of the key outcomes was overhauling budget reporting, including a requirement for central and local authorities to publish four budget accounts. That amendment represented a big step forward in transparency, experts said.
"With the latest amendment to the budget laws, there have been major breakthroughs in many aspects of the government's budget management work. But the previous regulations were no longer suitable for carrying out the new version of budget law, so it was urgent to revise them," said Liu Kun, the finance minister.
The regulations for implementing the budget law will clarify the scope of budget revenues and expenditures, according to Liu Yi, a public finance professor at the School of Economics at Peking University. That is conducive to the establishment of a scientific and sustainable modern financial system that optimizes the allocation of fiscal resources and supports long-term stability.
The new regulations indicate "the financial departments of local governments at all levels are responsible for the unified management of local government debts", which is helpful to restrain local authorities' impulse to borrow too much money, Liu added.