Chinese finance minister's to-do list

4. It is a long, hard struggle to get State-owned enterprises (SOEs) to contribute to the general budget. Central SOEs pay a portion of their profits into the "state capital management budget", which is run separately from the MOF's budget. But most of that gets distributed right back to the SOEs via R&D subsidies and other means. In 2013, of the 106 billion yuan in central SOE dividend payments, a tiny 6.5 billion yuan (6 percent) went to the MOF's general budget. The MOF hopes to receive 18.4 billion yuan in 2014, 13 percent of the dividends. The MOF report suggests that local SOEs do not pay dividends into the MOF budget at all.

5. Nothing more on the property tax. The MOF report basically repeats the November 2013 Third Plenum stance that the government would "accelerate property tax legislation". We have not spotted any signs of acceleration in the past four months.

6. Minister Lou wants to increase budget transparency. The MOF will require most ministries to publish detailed budgets in 2014 and will encourage local governments to begin to do the same. It will be compulsory for government-department spending on food, travel and vehicles to be published. Minister Lou understands that a bit of sunlight can help him curb waste and abuse. The MOF will also try to expand its ability to asses spending – too much money is spent on too many projects without any post-hoc attempt to measure how effective the spend was.

7. The MOF is coming after local governments that rebate corporate and personal income tax. Rebates have been a common way of attracting enterprises and individuals to the local area. Taxes are collected in full, as legally required by law, and the localities then return to the taxpayer a portion of the taxes they have not sent up to Beijing. Corporate tax rebates are still extremely common and undermine the progressiveness of the overall budget.

8. The MOF wants to get more flexible about how it runs its budget. One challenge for the MOF is that the budget is authorized by China's parliament, the NPC. However, the plenary NPC meets only once a year. This means that outside of the rare emergency, the budget cannot be altered. Minister Lou wants to have more flexibility, to be able to issue more debt to finance a bigger spend, or to save funds if the economy is booming. We do not know how such flexibility could be achieved, but the minister has said he would like to do so. It would make sense to us if the Economic and Finance Committee of the NPC, which meets regularly, is empowered to assess and approve MOF budget adjustments.

9. Another small step forward in local government debt policy. The MOF report notes that the ministry intends to integrate income and debt repayments by local government investment vehicles (LGIVs) into local government budgets. At present, LGIVs operate independently, but usually with the implicit support of local government budgets. The MOF report also highlights the ministry's ambition to take the debt-raising function from the LGIVs and put it into government budgets. However, as we had expected, the MOF is being conservative in how fast it expands the local government bond-issuance program (which it still calls an experiment).

10. Work will start on a medium-term budget framework. With rising and ongoing social spending commitments, the increasing burden of pension subsidies and the need one day to repay at least some of the LGIV debt, the MOF has to plan ahead. At present, only the present year's budget is published. The MOF will begin work on broad budgets to set out spending commitments three years into the future.

The author is chief economist at Standard Chartered Bank (China) Ltd. The views do not necessarily represent those of China Daily.