China will amend its decade-old budget law to more closely regulate the use of government funds not covered by the budget, which are estimated to be 300 billion yuan to 400 billion yuan (about 50 billion U.S. dollars) a year.

"A lack of effective regulations means the improper use of such funds has become a hotbed for illegal activities and corruption," said Yu Guangyuan, an official with the Budgetary Work Commission of the National People's Congress, China's legislature.

He said most economic crimes committed by leaders of state-owned enterprises and civil servants involved the illegal use of government funds outside the budget.

While budgeted funds are under strict supervision, extra-budgetary funds are easier to be manipulated as they are not attached to specific line items in a budget.

According to Yu, amendments to the budget law will be submitted to the NPC Standing Committee for deliberation in August this year. They are expected to be approved at the annual NPC session next year.

"The amendments will require finance departments to produce more scientific budgets. It will also likely stipulate that any surplus be transferred to next year's budget," said Yu.

He said that if a government needs to use a budget surplus within the budget year, finance departments may be required to file a report to the people's congress.

According to Yu, the amendments should empower auditors to examine the final financial statements of the government. They should also include stipulations that enhance examination and supervision of government budgets by the People's Congress.

In 2005, the central government's budgetary surplus was more than 160 billion yuan (about 20 billion dollars).

Source: Xinhua