China revises law to better manage government money(2)

Money raised by the bonds can only be used for public services, and not for government operations.

The debts must be included in the provincial budget and supervised by provincial people's congresses.

The central government will assess risk in local debt. If the risk is out of control, it has promised warnings, a fast response and punishment for those responsible.

Finance Minister Lou Jiwei told a press conference here that local governments across the country had about 12-trillion-yuan debts by the end of last June.

"As far as I know, the size of local government debts has not increased notably in the past year and the risks are under control," he said.

The revised law has helped clarify several important principles on how to manage local debts, setting rules and dividing liabilities, he said.

FULLY BUDGETED GOVERNMENT FUNDS

The old Budget Law was adopted when the country was still strongly influenced by planned economy concepts and at an early stage of applying budget management. It had only a very general definition of what the government budget covered, leaving huge room for interpretation by governments.

The revised law, on the other hand, defines the government budget in four parts: the general budget, the budget for government-managed funds, the budget for state-owned assets and the budget for social insurance funds.

For years, China's government budgets only included the general budget, largely made up of tax revenue and spending on public services and government operations.

The revenue gained through transactions in use rights of state land, accounting for a large part of local government revenues, and finances of state-owned enterprises were not budgeted nor supervised by legislatures.

Under the revised law, the revenue from land transactions is covered by the budget for government-managed funds, while the financial situations of state-owned enterprises are supervised through the budget for state-owned assets.

In 2013, the central government for the first time included these four parts in its annual budget submitted at the NPC annual session.

GREATER TRANSPARENCY IN BUDGET

The revised law introduces detailed provisions to ensure the public's access to government budget information.

"The old law did not have any provisions about public supervision. The provisions to improve budget transparency is another highlight of the revised law," said Wang Chaoying, head of the economic laws division with the Commission for Legislative Affairs of the NPC Standing Committee, at Sunday's press conference.

It asks government financial departments to publish their budgets and final account reports within 20 days after they are adopted by the legislature. It also gives the public access to information about local government debts, purchases, budgets and audits.

The new law also clearly regulates how the legislature to examine the government budget report and what to examine. It specifically asks the legislature to examine major expense items and big investments as well as to inspect the development and efficiency of such projects.

Lawmakers also adopted several other important bills at the week-long bi-monthly session, including minor revisions to five laws facilitating the central government's ability to cancel or decentralize administrative approvals and a revision to the workplace safety law.

They adopted three resolutions. One was the decision on the election methods of the chief executive of the Hong Kong Special Administrative Region (HKSAR) and its Legislative Council.

The other two were about setting Sept. 30 as Martyrs' Day and setting up special courts for intellectual property rights in Beijing, Shanghai and Guangzhou.