GOING GLOBAL: A visitor watches the production of a woodcut print at the China pavilion at the 42nd London Book Fair, one of the world's largest book fairs, on April 17 (WANG LILI)

According to the draft guidelines, the Central Government will complete the categorization of all existing public institutions by 2015.

Efforts should be made to conduct assets inspections, financial auditing, capital rating and debt verification before transforming public institutions, the circular says, adding that national assets must be registered.

Additionally, the program to peg the salaries of public institution employees to their performance will be accelerated.

The circular also clearly defines how employees of these quasi-government institutions will be paid and insured in the future. At the center of these pay reforms is a plan to gradually shift such employees away from employer-based pension schemes over to the universal social security system.

To ease the pain of these reforms, the pensions of retired public institution employees will be managed according to the old scheme, future employees will join the new system while current employees will enjoy a slightly better deal during a transitional period.

Points of disagreement

The new guidelines, which are expected to complete the reform once and for all, will face several hurdles in implementation.

Experts said that the reclassification of public institutions will be an arduous task. There has been wide consensus that public institutions with administrative roles, such as the China Earthquake Administration, the China Securities Regulatory Commission and the China Banking Regulatory Commission, will be merged into the government and those that can operate as businesses, such as publishing houses, will be transformed into companies.

However, an anonymous expert told the China Business Journal, a weekly published in Beijing, that there are institutions that perform administrative functions, offer social services and get involved in commercial activities at the same time and their classification can be baffling. One example raised by the expert is universities, which in general should be classified as public institutions yet often have many purely money-making training programs under them.

"During the next stage of reform, many public institutions will try to prove themselves as providers of social services, which will make them entitled to government funding," Gu Xi, a professor at the School of Government of Peking University, told The Economic Observer, a Beijing-based business weekly. He said that many public institutions will have to be partitioned into several entities according to different natures of their functions.

Cheng Enfu, a researcher with the Chinese Academy of Social Sciences, said that the number of public institutions that provide social services should not be reduced too dramatically after the reform, otherwise the lack of vital services would cause social dysfunction.

But some public administration experts said that the reform guidelines should have stated more clearly how public hospitals are expected to partially fund themselves. According to the guidelines, community-based clinics are entitled to full government funding while the expenditure of hospitals will only be partly covered by the government. In China's previous health care reforms, insufficient government funding, sometimes only accounting for 10 percent of a hospital's operational costs, forced medical facilities to run like businesses and prescribe unnecessary medicines and tests for patients to make ends meet.

Employees of organizations that will retain their status as public institutions after the reform, such as hospitals and educational institutions, worry that their benefits package will shrink after the reform.

As a result of a pilot reform in Shanghai, university lecturer Jiang Wen complained that various subsidies totaling nearly 1,000 yuan ($159) disappeared from her monthly salary. Like other pubic institutions, the university Jiang works for was required to divide its employees' salaries into two parts: a base salary and a performance-based salary. Instead of giving their staff a pay rise, many public institutions put former subsidies aside as "performance-based salary."

"If the payment reform is to replace subsidies with a performance-based salary, nobody will be happy," Jiang said. "Unlike subsidies that were a fixed part of the salary, the amount of performance-based salary depends on one's appraisal results."

However, the new guidelines will tailor design appraisal methods for public institutions of different types to ensure that employees will be fairly paid and motivated.