All-round reform

The communique said: "we must attach importance to legislation, explicitly clarify the duties of governments at various levels ..."

Rui Meng, a professor of finance and accounting at the China Europe International Business School, said he believes the central government will withdraw some expenditure duties.

"Previous statements only stressed local government 'initiatives', but this reform is aimed at the long-discussed disparity between local government revenue and spending responsibilities," he said.

"This is a call for curbing reckless borrowing," he continued. "Too often, local governments have invested heavily in redundant projects with very low returns. They should leave most investments－infrastructure, for example－to the market, thus reducing low efficiency and rent-seeking in these activities."

Curbing reckless borrowing also requires a transparent budget system, he said.

Nearly all local governments have to rely heavily on land rights auctions to supplement their revenue, hence the skyrocketing price of real estate in many cities. The governments are hungry for new revenue sources, while their means of raising money (such as bond issuance) and ways of managing its use are yet to be effectively regulated. There is no transparent and fully accountable system for local government debt, which is raised separately and lacks a uniform national regime, and is often disguised in many forms, giving rise to various strains of corruption. This is an aspect where the role of law is fundamentally important. China will have to rely on laws and their enforcement to manage the central-local divide of fiscal revenues and duties. However, all changes to the law will be decided by the central authorities.

While last year's 18th CPC National Congress called for building an "ecological civilization", this year's third plenum discussed how to make it happen.

To build a beautiful China, the country must improve the system of land development, conservation of resources and environmental protection, the communique said.

A bottom line for ecological protection should be established, it said. China must improve the system of property rights for natural resources and better regulate the use of those recourses. The country should also establish a system of compensation for the use of natural resources and the subsequent impact on the ecosystem.

"It is no longer a concept, but a workable plan with the same weight as economic and market development, and will involve participation across all dimensions－political, social, and cultural," said Zhang Xiaode, a professor at the Chinese Academy of Governance who specializes in economic and ecological civilization

  The Environmental Protection Law and the 77 environmental protection courts nationwide are beginning to function to provide a legal framework. Pollution and environmental damage offences are under the increasing effective check of the justice system, but conservation and emissions reduction mainly rest with the government's efforts to adjust the industrial and energy structures, rather than market leverage of taxes and fees. China's energy consumption per unit of gross domestic product fell 5.5 percent in 2012 compared with 2011. However, the decline is 7.3 percentage points lower than the central government's target. To further cut emissions and reduce energy use the nation needs to introduce more technological breakthroughs.