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Li Weiguang, a professor of government finance at Tianjin University of Finance and Economics, approved of some of the changes proposed in the draft, but said the proposal dodged the basic principle of budget making and implementation.
For instance, he said, although the draft requires a government budget and adjustments to be approved by lawmakers before being carried out, it does not specify the procedures if the proposed budget is vetoed.
The authority of legislatures in reviewing and approving budgets is the cornerstone of other measures in the draft law to regulate government income and spending, according to Li.
Another controversial issue in the draft is the legalization of special accounts opened by finance departments in commercial banks. In the draft, local departments should deposit their budget revenues in both the national treasury and finance departments' special accounts.
"The drafted amendment has increased finance departments' power, which would increase risks to the country's financial system," said Shi Zhengwen, Director of Center for Research in Fiscal and Tax Law of China University of Political Science and Law, at a seminar on the amendment to the Budget Law on August 3.
Meanwhile, as government spending on vehicles, receptions and overseas trips continues to make headlines, there have been growing calls for lawmakers to clarify the expenses in the Budget Law, in hopes to facilitate public scrutiny on the government's wallet.
According to figures released by the MOF in June, central government departments spent 9.36 billion yuan ($1.49 billion) in fiscal funds on the three items last year.
In breaking down the figures, about 2 billion yuan ($317.46 million) was spent on overseas trips, 5.9 billion yuan ($936.51 million) on purchase and maintenance of vehicles, and about 1.5 billion yuan ($238.1 million) on public receptions.
Although a regulation introduced in 2008 requires governments to release annual reports on the "three expenses," the current Budget Law does not specifically put forward such a requirement or a request to cut them.
Shi said that because the "three expenses" are not clearly defined in the Budget Law, people hold various interpretations of what should be included in the expenses.
"The lack of standards has enabled governments to put off their obligation to release details of spending on the three expenses and instead release a general figure," he said.
According to Liu at Peking University, more detailed reports are significant to prevent the optional implementation of budgets and check the power of the government.
He Zhenyi, an honorary academician of the Chinese Academy of Social Sciences, felt disappointed that the draft amendment only requires publishing details of the public budget but has no specific requirements to other three aspects—governmental fund budget, state-owned capital operation budget and social security budget.
"In fact, expenditures of the latter three budgets take a fairly large part of the total spending, so there should be a special item in the Budget Law to require revealing the refining details of the three budgets," He said.
The latest draft amendment to the Budget Law removes an article introduced in a previous draft amendment last November, which would have allowed local governments to issue bonds directly within a quota set by the State Council and approved by the NPC.
Liu at Peking University said, "The lift of the ban on local governments' debt issuance has a high risk due to the uncompleted supporting systems, and the debt that cannot be paid off will finally be transferred to the Central Government. So the Central Government should take a prudent attitude toward it."
Figures from the National Audit Office show local debt totaled 10.7 trillion yuan ($1.7 trillion) at the end of 2010, in which local governments were responsible for 70 percent of the debt repayment. This and next year will witness the climax of local government debt maturity, with more than 3 trillion yuan ($476.19 billion) of debt maturing over these years.
According to the latest draft to the Budget Law, the MOF can issue bonds on behalf of local governments only in accordance with the laws and regulations issued by the State Council.
In response, some experts expressed concern that the cancellation of direct bond issuance will put local authorities under greater financial strain.
"It is imperative to open the bond market to local governments as a proper financing channel. China has made efforts to legalize local governments' financing systems for years, but the latest draft amendment has changed all of that," said Jia with the MOF's Fiscal Science Research Center.
He believes allowing local governments to issue bonds will help improve their fundraising transparency. "It would have been a chance to prevent further hidden debt and risks," he said.
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