China's Finance Ministry launches budget drafting for 2004

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Last updated at: (Beijing Time) Thursday, September 18, 2003

China's Finance Ministry launches budget drafting for 2004

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The budget layout for central government departments in 2004 has been launched. According to the Ministry of Finance, central government departments are drafting budgets for subordinate second-grade departments and also its departmental annual budget.

The ministry expects only a minor increase of central financial revenue in 2004 and the imbalance of revenue and expenditure remains an acute problem. Thus, the budget authority has been committed to a "strict and prudent" principle in drafting budgets for central government departments.

The Ministry of Finance hopes that not any new project will be funded in principle except the projects already set by the State Council, China's cabinet. The ministry will also select some prominent funding projects to "follow up and assess cost-efficiency" in a bid to establish a budget project cost-efficiency assessment index system.

The year 2004 will hopefully be a watershed to China's central budgeting. The ministry will work to change the pattern of "highlighting distribution but ignoring management", improve basic expenditure budget for fixed number of personnel and fixed amounts and gradually cover government property management in budget management.

More stand-by funds likely

In the budget plan for central government departments in 2004, what deserves attention is the high probability of a 2 percent increase of stand-by funds for the departments so as to offset possible temporary adjustment in the budget implementation process.

According to the established rules on departmental stand-by funds, the pilot units with a fixed number of personnel and a fixed amount of budgets can set their stand-by funds at a ceiling of 3 percent of public funds. Starting in 2004, such funds can be arranged. Meanwhile, stand-by funds set according to classes, grades and rules should be singled out and explained in the replying document.

According to financing officials, the reason to raise stand-by funds is to "offer more flexibility in departmental budgets" so as to cover sporadic, temporary expenditure. Thus, the ratio of readjusting departmental budgets could be effectively lowered and the department could function better.

"During the peak SARS period, we received a large sum of applications to purchase respiratory machines. And each case was so urgent that we had no time to review it before granting. I was wondering then that why we had no idea of the use and effectiveness of the substantial funds earmarked for medical devices procurement," said one official of the Ministry of Finance. "We must address the problem of 'highlighting allocation but ignoring management."

Follow up budget projects and assess cost-effectiveness

Sources form the Ministry of Finance said that the ministry would scan its "project database" in 2004 and redefine projects of common departments and institutes. Some basic expenditure projects unqualified as project budget expenditure will be excluded in the database. The ministry will review with a unified standard all key state projects, and special operation projects listed in departmental budgets. Some projects that are bound to be carried on to the next year will also be reviewed after consulting with the department.

Traditionally, the number of projects and the sum of capital listed in budget draft applications to the Ministry of Finance are "too much to be fed up with current financial resources", according to financing officials.

As a result, the ministry requires that all departments should select, research, preview and list in a rational sequence their application projects in terms of urgency and priority. The ministry will first fund those urgent, feasible projects in line with the year's financial situation. Special operation projects and those over-year projects will then be arranged while other common projects of central government departments follow suit according to the "project sequences".

Additionally, departments are also required to attach a cost-efficiency report from 2003-2004 over-year long budget projects as an important reference to apply for the 2004 budget. The ministry will also select some prominent funding projects to "follow up and assess cost-efficiency" in a bid to establish a budget project cost-efficiency assessment index system. (China.org.cn)

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