NPC DECISIONS: POWERS AND PROCEDURES
Among the NPC’s numerous powers the power to make decisions is distinguishable from its lawmaking powers. However, the notion of a power to make decisions, or simply the decision power, is quite perplexing to both foreign readers and the Chinese people as well. I shall pay attention here to the special value that the NPC attaches to this power to make decisions.
In this chapter I first clarify why the NPC makes decisions rather than simply enacting laws. Then what spheres of concern does the NPC deal with by decision? Thereafter I will briefly discuss the hot problems involved in the exercise of the decision power by the NPC. Fourthly, I will look into the normal procedures that the NPC applies when it makes decisions. After that I will discuss the budgetary procedure in great detail. Finally, I will conclude with some comments.
A. Why Make Decisions Instead of Laws
According to official statistics, the NPC Full Congress and the NPC Standing Committee have together made 155 decisions during the period between February 23,1979 and November 1,1997. Despite the precision of this enumeration, however, academic study of the NPC’s powers and procedures lags far behind the NPC’s active exercise of the power. Scholars agree that it is impossible to give a clear-cut definition to encompass the decisions that have been made by the NPC over the years.
A more helpful approach for understanding the NPC’s decision making comes from looking back at the 155 decisions. Most of them are titled as decisions. Some of them are termed resolutions or regulations. A rough categorization of the 155 decisions places them into distinguishable groups as follows:
1) Decisions to amend or supplement existing laws. The Decision to Amend the Organization Act of the Courts of the Peoples’ Republic of China is one of such decisions.
2) Decisions about implementing laws and interpreting laws, delegating legislative power, about elections, about establishment of special regions, and the like. Examples include the Supplementary Regulations on the Time Limits to Finish Criminal Cases, and the Decision on the Establishment of the Hong Kong Special Administrative Region.
3) Decisions about fundamental policies. Major new problems call for regulation by law. Sometimes the NPC is not yet well prepared to make the needed law. Instead decisions are made to provide the most needed directions in a timely manner. The Decision on Reinforcing Comprehensive Control of the Public Order is one example. The Decision on Reinforcing Oversight over Economic Work provides badly needed law support to the NPC Standing Committee’s oversight over the executive’s economic work.
4) Decisions on other major, single issues. The NPC may establish the National Day with a decision. It may also decide to place the Changjiang Three Gorges project on the ten-year plan of the national economic and social development.
5) Decisions to approve reports from the other constitutional branches. Every year the NPC Full Congress approves with Resolutions reports from the State Council, the Court and the Procuratorate.
All decisions of the NPC are as valid and binding as the statutes it passes. What causes the NPC to make decisions rather than simply to make laws? The decision power has special value to the NPC. Then what is that value?
1. The Value of Decisions
The most penetrating study to date on the decision power of the NPC and LPCs is by Cai Dingjian in his book, Chinese People’s Congressional Government. According to Cai, the decision power is valuable to the NPC in both symbolic and pragmatic ways. In the first place, the decision power enables the NPC to act in behalf of the people on virtually every important national issue. Thus the decision power expresses China’s constitutional principle that the people are the masters over all state affairs.
Secondly, for the NPC the most flexible and quickest manner of legislation is decision enactment. The NPC has a multitude of choices available when it decides matters of national importance. Legislation is like heavy artillery. It decides in large scale. However, legislation is cumbersome because to the Chinese, law is exceedingly formal and serious. They will not pass any law bill until it has been improved almost to everybody’s liking. Another approach to policy is by choosing the personnel for the State Council, but the impact of these choices on national affairs is indirect and allows only a secondary role for the NPC to play. The NPC may impose its will through the use of oversight instruments. However, many oversight tools granted by the Constitution seem difficult to use on the one hand, and the conventional oversight fashions are not yet tough enough to change the status quo. By decision enactment the NPC can, in a most timely manner, order the other constitutional branches what to do. Then the NPC does not have to spend time balancing all the interests. It is widely accepted among Chinese that decisions differ from law largely in that the former can be experimental, narrowly defined and preliminary efforts for later law making. The inclination of the NPC Standing Committee to first enact single decisions of oversight instead of the omnibus Act of Oversight illustrates the fine distinction. Enactment of an omnibus Act of Oversight has been expected from the NPC for several terms. However, none of the drafts has yet proved to be acceptable to all sides concerned. So the 9th NPC Standing Committee still waits for consensus on an omnibus act of oversight. For some progress it turned to making specific decisions. The tactic works very well and by the beginning of the year 2000 it had already enacted two substantial decisions of oversight. One is the 1999 Decision on Reinforcement of Scrutiny and Supervision of the Central Budget. The second is the Decision on Reinforcing Oversight over Economic Work. With these two decisions the NPC set forth its measures for two of the most knotty issues of oversight.
2. Using the Decision Power to Solve Problems
What is the NPC’s decision power after all? Cai Dingjian’s insight on the question is very enlightening. The decision power is a substantive power by which the NPC expresses its will and settles a problem. With this decision power the NPC can make a “substantive prescription” on a “specific and actual problem.” Another feature is that with it the NPC can provide a “behavioral norm” for the people.
One can say that the NPC’s decisions in most cases are special laws that the NPC makes in a timely manner to cope with urgent situations, hot matters or major single issues. They are laws because they set behavior norms and are as binding as statutes passed by the NPC. They are limited in that the NPC has not yet made comprehensive laws on the same questions in the same time period due to difficulties with consensus.
B. Sphere of Concern Subject to NPC Decisions
Kan Ke, a learned senior staff member of the NPC Standing Committee, offers two methods and six principles to delineate the sphere in which the NPC Full Congress and the NPC Standing Committee make decisions. The two methods are enumeration and exclusion. First he enumerates all decision powers granted to the NPC by the Constitution and other laws. Then he excludes all powers that have been granted to other constitutional branches. His six principles are concerned with maintaining the leadership of the Communist Party, reinforcing democracy and the rule of law, promoting economic and social development, propelling smooth continuation of the reform and open up policies, upholding interests of the masses, and safeguarding the equal rights of the minority nationalities.
By applying his methods and following his principles, Kan Ke defined a sphere in which the NPC Full Congress can make decisions regarding seven matters as follows:
1) To examine and approve the plan for national economic and social development.
2) To examine and approve the state budget.
3) To approve establishment of provinces, autonomous areas and municipalities directly under the central government.
4) To decide the establishment of special administrative regions and the systems to be instituted there.
5) To decide questions of peace or war.
6) To decide the establishment, disestablishment or merger of ministries of the State Council.
7) To decide additional matters to those listed in Article 62 of the Constitution, which should be decided by the highest organ of state power.
According to these methods and under these principles the NPC Standing Committee can make decisions regarding the next ten matters as follows:
1) To examine and approve budgetary adjustments to the plan for national economic and social development or to the state budget as that proves necessary in the course of implementation while the NPC Full Congress is not in session.
2) To decide approval or annulment of treaties and agreements with foreign states.
3) To decide to institute and confer state medals and titles of honor.
4) To decide on the granting of special pardons.
5) To decide, when the NPC Full Congress is not in session, on the proclamation of a state of war in the event of an armed attack on the country or in fulfillment of international treaty obligations concerning common defense against aggression.
6) To decide on general mobilization or partial mobilization.
7) To decide on the imposition of martial law throughout the country or in particular provinces, autonomous areas, or municipalities directly under the central government.
8) To decide, while the NPC Full Congress is not in session, on the establishment, disestablishment or merger of the ministries of the State Council.
9) To decide disagreements on major questions reported by the Procurator-General of the Supreme People’s Procuratorate between the Procurator-General and the majority members of the Procuratorial Committee.
10) To decide, upon authorization by the NPC Full Congress, matters other than those listed in the first twenty clauses of Article 67 of the Constitution.
For some the sphere in which the NPC Standing Committee exercises its decision power still seems incomplete. According to Cai Dingjian, for example, the NPC Standing Committee can decide measures to implement laws, amend laws, reform state institutions, especially the institution of the NPC Standing Committee itself, and delegate powers to the State Council. In short, the spheres of the NPC Full Congress and of the NPC Standing Committee to make decisions are large and their circumferences continue to grow around the cores sketched above.
C. Problems in Exercising the NPC’s Decision Power
Several troublesome problems have to be solved so that the NPC can effectively exercise its power to make decisions on major matters of the state. Two problems frequently bother the NPC members. How is the decision power of the NPC to be reconciled with that of the Communist Party? Relatedly, how is the decision power of the NPC to be reconciled with that of the State Council?
1. Relating the Decision Power of the NPC and That of the
For many years this was a most perplexing problem. Under the Constitution, the Communist Party is the leading core of the nation. Making decisions for the nation is the most important way that the Party realizes its leadership role in the nation. Likewise, under the Constitution, the NPC has power over state affairs. In the past people made no efforts to differentiate the Communist Party’s power to make decisions for the nation from the NPC’s decision-making power. Formerly the NPC was of little relevance because the Party had already made decisions on matters supposedly to be decided by the NPC. The NPC was either ignored or its decisions merely rubber-stamped those by the Party.
Increasingly people considered this to be a problem requiring attention. Indeed, the campaign to separate functions of the Party from those of the state certainly included efforts to differentiate the Communist Party decision-making from that by the NPC. Chinese leaders sought a way to both maintain the right of the Party in making decisions for the nation and recognize the NPC’s power to make decisions for the state. Putting the question in a typical Chinese way, how should the Party improve its manner of leadership over the nation to facilitate a realization of the NPC’s decision-making power? The Chinese leadership is practicing two solutions. The first makes a theoretical distinction between functions of the Party and those of the NPC. The second distinguishes between two kinds of decision-making power according to their contents.
Deng Xiaoping has left words most favorable to distinguishing the two functions: “The harmful tradition of ‘governing the nation with the political party ’ left over by the Kuomintang is the most effective way to benumb the Party (meaning the Communist Party-author), to degenerate the Party, to ruin the Party and to break the Party away from the masses. We are opposed to the one-Party dictatorship of the Kuomintang; to it’s ‘governing the nation with the political party.’ We are especially opposed to spreading the harmful tradition of the Kuomintang into our Party.”
Guided by Deng’s favorable thoughts, time and again the Party proclaimed that it should withdraw from jurisdictions of state institutions. So in theory it is a settled matter that, as the Constitution provides, the NPC should exercise its power to make decisions. The Communist Party is in leadership but it is not a party in governmental business. Decisions made by the Communist Party cannot bind the public unless they are suggested to and adopted by the NPC in its own decisions. This is how the Party’s decisions differ from those of the NPC.
A more challenging problem is in dividing the turfs of the two kinds of decision-making power. Cai Dingjian has made a most helpful distinction to differentiate between the decision power of the Party and that of the NPC. The Party decides questions of guideline and the NPC decides specific state affairs. Cai warns that if the Party exercises its decision power on specific state affairs then it intrudes into the NPC’s realm of responsibility. For example, it is the Party’s guideline that China should realize four modernizations in two steps. Its response to the severe economic crimes and corruptions was to advance guidelines for punishing economic crimes and corruptions. Then it was left to the NPC to enact specific measures to implement the goals advanced by the Party. For instance, it is the NPC that examines and approves the Ten-year Projection of Social and Economic Development. The NPC makes decisions about how to punish economic crimes and corruption.
In my opinion, relations between the decision-making powers of the Communist Party and the NPC will become clear when there is recognition that the nature of the NPC’s decision-making power virtually equals the legislative power. The Communist Party’s turf is to set the policy direction and for the NPC to legislate that direction into law terms.
2. Relationships between the NPC and the State Council
Over the years conflicts between the decision-making power of the NPC and that of the State Council have been commonplace. These conflicts do not arise out of constitutional ambiguity. According to the Constitution, the NPC is supreme and the State Council is responsible to the NPC. It certainly follows that actions by the State Council are subordinate to those by the NPC. By the nature of things, the NPC’s decisions set policies and objectives whereas decisions of the State Council prescribe the administrative procedures and measures to implement the NPC decisions.
In practice, however, the State Council makes major decisions without the basis of parent decisions or laws from the NPC. Usually this is due to the failure of the State Council to bring issues before the NPC. Sometimes the State Council makes joint decisions with the Central Committee of the Communist Party, thus bypassing the legislative authority of the NPC. An oversimplified tradition of having the Party-to-decide and the Government-to-execute actually works against the NPC exercising its decision-making power. Solving such conflicts seems simple but it is not easy to educate the State Council to respect the decision-making power of the NPC.
The State Council did take positive action to enhance the NPC’s decision-making power in its report to the 9th NPC Full Congress in session 1. In fact, a most radical reorganization of the State Council was proposed by the in-coming administration headed by Zhu Rongji. On behalf of the State Council, State Councilor Luo Gan reported to the Chamber on four aspects of the planned reorganization: why the reorganization was necessary and urgent; what were the goals and principles of the reorganization; how the ministries would be reshuffled and, finally, how the reorganization would be carried out. NPC Deputies scrutinized both the reorganization report and the reorganization measure at one or two Delegation sittings. They overwhelmingly welcomed the reorganization and urged that great care be taken by the upcoming State Council not to repeat the reduction-expansion lessons from the past decades. Then the Chamber voted for a resolution to approve the institutional reorganization measure from the State Council. In this way the NPC Full Congress enjoyed an opportunity to decide a substantially important work of the state.
D. The NPC’s Decision-Making Procedure
The outline of the NPC’s decision- making procedures is largely the same as that for legislating.
The NPC Full Congress makes decisions in largely the same fashion as it legislates. Only a few special points of the decisional procedure require elaboration. Unlike law bills, decision bills are not always strictly planned in advance. Nevertheless it is possible that the decision bills to amend laws will be listed in the yearly program of legislation.
After the NPC Full Congress or the NPC Standing Committee has passed law bills, the State President promulgates them. Decision-bills passed by the NPC Full Congress, are Promulgated by the Presidium of the NPC Full Congress, in the NPC Standing Committee Bulletin and in the leading official national newspapers. The NPC Standing Committee scrutiny of decision-bills is different from its legislative procedure in the same two ways as mentioned above.
E. Multiple Facets of the NPC’s Budgetary Power
Leading thinkers suggest four differing perspectives on the NPC’s budgetary power and procedures. First, the orthodox classification of the NPC’s constitutional powers, as represented by Kan Ke, deems the NPC’s power to examine and approve the budget as deriving from its power to make decisions. The budget is one of the uppermost matters to be decided by the NPC so the NPC’s power and procedure to examine and approve the budget is a decisional one.
Secondly, budget actions may be characterized as legislation. Up to the present the NPC and LPCs lack seriousness about the nature and validity of the budgets they approve. However, increasingly people in the NPC and LPCs realize that an approved budget is actually a law. Therefore, a budget is as binding as other sorts of acts passed by the NPC or LPCs. Wang Min, one of the first-rate experts on the budgetary powers and procedures of the NPC and LPCs, writes in his classic monograph, Supervision Systems of Organs of State Power on National Economic Plan and Budget, that “The national economic plan and budget as approved by the Full Congresses are legally binding (they can be understood in some sense as law bills), therefore executives shall neither adjust nor change them.”
A third perspective views budgets as supervisory. The NPC’s power and procedures for supervision are comprehensive in nature. They consist of many sub-powers and sub-procedures. The leading sub-power and sub-procedure under the broad umbrella of supervision is the budgetary power and procedure.
The fourth perspective assumes the essential importance of the budget itself. The NPC’s power to approve the budget is so important that it deserves special attention in its own right. The NPC differs from Western legislatures in that it did not rise to power by trading taxing power for legislation. Indeed, the NPC was rather slow to appreciate the importance of its purse power to itself as an institution and to the state. However, by adopting the 1999 Decision on Reinforcement of Scrutiny and Supervision of the Central Budget the NPC manifested to the public that it has extensive budgetary power as well a quiet determination to master governmental work by exercising its formidable powers of the purse.
I interpret the NPC’s budgetary power and procedures to be a proper part of its power to make decisions. I understand that the NPC’s budgetary decisions doubtless are as binding as its laws and that every budget it approves is, in fact, a law.
I devote much of this chapter to the budgetary power and procedures for several reasons. In the first place a detailed account of the budgetary power and procedures will help readers understand the NPC’s rather abstract decision-making power and procedures. Secondly, the budgetary power carries so much weight in public policy that it must not be touched only lightly. Indeed, to examine with care how the budgetary power and procedures were reformed in 1999 will reveal a great deal about what the NPC has accomplished to realize a rule of law in China. One can hardly overestimate the importance of the NPC’s capability to check the executive branch with the power of the purse.
F. Budgetary Rivalry between the NPC and the State
Generally speaking, the NPC is careful about two relations as it exercises its decision-making power. The first is between the NPC and the Central Committee of the Communist Party and the other is between the NPC and the State Council. The Communist Party has little direct involvement with budget making. This is a welcome mark of progress that the Party gives little attention to this state function. Now the only significant rival that the NPC has to deal with in its budgetary process is the State Council.
In the NPC the Full Congress and the Standing Committee share power over the budget. Therefore there is actually a triangular relationship that connects the NPC Full Congress, the NPC Standing Committee and the State Council. Together they decide what revenue the state gets every year and how it spends the money annually. The State Council drafts the budget and submits the draft budget to the NPC Full Congress together with its explanations. The NPC Full Congress scrutinizes and approves the budget. The State Council implements the approved budget. The NPC Standing Committee supervises the implementation of the approved budget, scrutinizing adjustment measures on the approved budget requested by the State Council and approving those adjustments.
1. The NPC Full Congress’ Budgetary Power
Two considerations shape the way that the budgetary process works. First, the NPC Full Congress is omnipotent in terms of power. This general principle certainly applies fully to the budget process. At its most extreme, the NPC Full Congress could take all powers away from the NPC Standing Committee and the State Council and take over budget making on its own. On the other hand, practical considerations necessitate that the NPC Full Congress accepts an actual division of labor among itself, the NPC Standing Committee and the State Council to produce a meaningful and effective budget.
In practice the NPC Full Congress engages in two major budgetary actions. It scrutinizes the budget that comes from the State Council. Every year the State Council proposes a draft budget to the NPC Full Congress and reports to the Full Congress about how it drafted the budget. In other words, all other state institutions, even the NPC Standing Committee, cannot presume authority over formal scrutiny of the state budget. Second, the NPC Full Congress has exclusive power to approve the budget. The NPC Standing Committee cannot claim the approval power, nor can any of the other state institutions.
The budget submitted to the NPC Full Congress for scrutiny and approval is a combination of the central budget and local budgets. The latter are the combined budgets of local governments at all levels. I term that combination the grand national budget. The NPC Full Congress’ budgetary jurisdiction extends beyond the central budget. Instead, budgets for both the central and the local governments must obtain approval from the NPC Full Congress before their implementation. This reveals the budgetary omnipotence of the NPC Full Congress.
Every year the State Council divides into two parts the grand national budgetary papers submitted to the NPC Full Congress. One part is a draft of central and local budgets for the current year. The other part is on the implementation of the previous year’s central and local budgets. So the NPC Full Congress not only scrutinizes and approves the central and local budgets, but also scrutinizes and approves the implementation results for both. Both central and local budgets not yet approved by the NPC Full Congress cannot be implemented. Moreover, implementation results that are rejected by the NPC Full Congress are also illegal. The NPC Full Congress exercises a complete circle of control over revenues and especially expenditures of the State Council and of all its local subordinates.
A related and fundamental question asks, can the NPC Full Congress decide not to approve the budget? The Constitution, the 1994 Budgetary Act and even the latest 1999 Decision on Reinforcement of Scrutiny and Supervision of the Central Budget actually dodge this critical question. A careful reading of the Chinese Constitution reveals an emphasis on consultation instead of confrontation. Perhaps the law does not favor outright rejection of the budget by the NPC Full Congress. Wang Min seems not to accept this interpretation. Wang argues that the Full Congress can decide not to approve the State Council’s report on the implementation of the previous year’s budget and that the State Council should take responsibility for anomalies in budget implementation. Can the NPC Full Congress amend the budget? Again the law keeps silent on this issue, but in practice the NPC Full Congress has never amended the budget. It can change or annul inappropriate resolutions by the NPC Standing Committee on the budget or on the final accounts. Theoretically this power is a necessary safeguard against any possible mistakes or even abuse of power by the NPC Standing Committee in the budgetary process. This tells us that in the NPC Full Congress - NPC Standing Committee side of the triangle, the NPC Full Congress dominates the budgetary power.
Constitutionally, the NPC Full Congress controls the budget on both the revenue side and the expenditure side. In practice, however, the NPC Full Congress pays attention largely to the expenditure side of the budget due to its acceptance of a decision made in 1984. In that year the 6th NPC Standing Committee adopted a decision during its 7th session to make a grand authorization for taxation by the State Council. According to the 1984 tax decision the NPC empowered the State Council to set up tax categories and change tax rates. So the NPC Full Congress does not concern itself with tax categories or what tax rates apply. Its primary concern about taxation is to know that the budget balances the expenditures with adequate revenues. This delegation of taxation power to the State Council may relieve the NPC of hard work regarding taxation. However, it is not sound constitutionally. Some NPC Deputies have spotted the issue. Deputy Wang Jiafu, a jurist of the Chinese Academy of Social Sciences, argues that the NPC should take the taxation power back from the State Council. Taxation affects the people very much. It is too substantial a matter to leave to the State Council.
2. The NPC Standing Committee’s Power over the Budget
It is wrong to argue that the NPC Standing Committee is more powerful than the NPC Full Congress in the budgetary process. However, the NPC Standing Committee does play a substantial role in making sure that the budget approved by the NPC Full Congress is faithfully implemented. Keep in mind that all the NPC Standing Committee can do or can undo in the budgetary field is limited to the central budget. The NPC Standing Committee can do nothing about local budgets.
The NPC Standing Committee exercises six specific powers regarding the central budget.
(1) It hears reports about the use of excess revenues; those that exceed estimated revenues. The State Council reports to the NPC Standing Committee how it spends the extra revenues. According to the 1999 Decision on Reinforcement of Scrutiny and Supervision of the Central Budget, the State Council can expend the extra revenues. It is obliged simply to report the spending details to the NPC Standing Committee.
(2) It scrutinizes and approves fund regulation according to specified headings. As the State Council spends funds it must strictly follow all the headings contained in the approved budget. When the State Council deems it necessary to adjust funds under headings of agriculture, education, science and technology and social security, it must report to the NPC Standing Committee for prior approval. In the future the NPC Standing Committee will specify more headings, thereby increasing its control over expenditures.
(3) It scrutinizes and approves adjustments to the Central Budget. When circumstances necessitate adjustments on the central budget, the State Council must prepare an adjustment measure and submit it to the NPC Standing Committee between July and September. The NPC Standing Committee does scrutinize and approve such adjustment measures.
(4) It scrutinizes and approves the central final accounts. Each year the State Council formulates a final account on the central budget to account for implementation of the central budget. The NPC Standing Committee scrutinizes and approves the final accounts.
(5) It scrutinizes audit reports. Each year the NPC Standing Committee scrutinizes the audit report from the State Council on how the government implemented the central budget. The NPC Standing Committee may adopt a resolution to state its stance on the audit report as well as on the governmental work.
(6) It hears reports regarding off-the-budget funds. The NPC Standing Committee hears report from the State Council on revenues not listed in the budget and on their expenditure.
3. Budgetary Power and Responsibilities of the State Council
According to the 1994 Budget Act the State Council has broad powers and at the same time bears heavy responsibilities in the budgetary field. It is up to the State Council to formulate the central budget and submit the grand national budget to the NPC Full Congress. The State Council also reports the grand national budget to the NPC Full Congress. The State Council directs implementation of the grand national budgets. For example, it can decide to draw on reserve funds and extra revenues. It formulates whatever adjustment measures are needed for the central budget. It audits the implementation of the central budget, submits the audit and reports on it to the NPC Standing Committee. It formulates the final accounts. In all these actions it must report to the NPC Standing Committee. Finally, the State Council reports to the NPC Full Congress in session about the implementation of the previous year’s grand national budget.
G. The Grand Budgetary Procedure
In order to explain the budgetary procedure of the NPC Full Congress I want to apply the phrase, the grand budgetary procedure. The grand budgetary procedure starts in the budgetary procedure of the State Council and ends in that of the NPC Full Congress. The following discussion of the budgetary procedure of the NPC Full Congress refers to both but is more detailed about the NPC side.
The 1999 Decision on Reinforcement of Scrutiny and Supervision of the Central Budget introduced a remarkable reform in the budgetary procedure in the NPC Full Congress. It stressed the principle that “the budget precedes expenditure and that expenditure shall strictly abide by the budget.”
Prior to 1999 the NPC was only poorly aware of the budget’s importance and it did not exercise much budgetary direction by means of its budgetary procedure in the NPC Full Congress. The procedure was too general to play “any substantial role” in controlling the government’s purse. The 1999 reform requires the State Council to change its budgetary mode in three ways. It must formulate the budget department by department, provide detailed information about the budget and formulate the budget on a strict time schedule.
As previously noted, every year the budget reported by the State Council to the NPC Full Congress is a set of grand national budgets. I will limit my explanation to the procedures for formulating, scrutinizing, approving and supervising the central budget.
1. Previous Budgeting Practices
In the State Council
After the 1994 Budget Act the State Council promulgated a regulation in 1995 for implementing the new law. According to the 1995 budgetary regulation the State Council established a series of steps to carry out its budgetary responsibilities.
Step 1-The State Council instructed all central departments to formulate their own budget for the next year. The instruction went out prior to November 10.
Step 2-The Ministry of Finance arranged details for the central departments in the formulation of their budgets. The deadline accompanying this step is not revealed.
Step 3-Each central department reported its budget back to the Ministry of Finance prior to December 10.
Step 4-The Ministry of Finance collected all departmental budgets and formulated a draft central budget.The deadline accompanying this step is not revealed.
Step 5-The Ministry of Finance reported the draft central budget to the NPC Finance and Economy Committee and other NPC committees. The Finance and Economy Committee conducted the preliminary scrutiny on the draft central budget one month before the NPC Full Congress convened its annual session.
Step 6-The State Council introduced the grand national budget to the NPC Full Congress. The Minister of Finance reported the budget package to the Chamber on behalf of the State Council.
Procedure in the NPC Full Congress
Wang Qingxiu, an expert on the people’s congressional finance work, asserts that the complete budgetary procedure of people’s congresses (including the NPC) consists of five steps: preliminary scrutiny, report, scrutiny, approval and promulgation. The budgetary procedure of the NPC Full Congress is largely the same as its legislative one.
A noteworthy feature of the budgetary procedure is that the State Council must submit its draft budget to the NPC Standing Committee one month before the coming NPC Full Congress session opens. Another special point is that the guiding committee for the budgetary process by the Full Congress was the Finance and Economy Committee, rather than the omnipotent Law Committee. The budgetary procedure began when the State Council submitted to the NPC Standing Committee a bill on the major arrangement of the draft budget. The Council of Chairmen then assigned the bill to the Finance and Economy Committee. The Finance and Economy Committee initiated its scrutiny of the draft budget by referring the draft budget to its Plan and Budget Subcommittee for specialized and detailed scrutiny. The committee adopted the opinions and suggestions of the subcommittee and reported the bill back to the leading figures of the Standing Committee. They passed them on to the State Council. The State Council could make some revisions in the draft budget in response to the opinions and suggestions from the NPC Standing Committee. The Finance and Economy Committee’s scrutiny of the draft budget prior to the session of the Full Congress constitutes the preliminary scrutiny.
An important precedent that has shaped the NPC’s way of dealing with the budget dates back to the 1st NPC. The 1st NPC Standing Committee conducted a preliminary scrutiny of the budget for the NPC Full Congress. Nevertheless this precedent was not always followed in the later years. The 7th NPC introduced a reform of this procedure. The Rules of Procedure of the NPC Full Congress adopted in 1989 stipulated for the first time a more thorough preliminary scrutiny procedure on the budget. It required the Ministry of Finance to report to the NPC Finance and Economy Committee and other related NPC special committees on the major contents of both the budget and the implementation of the preceding budget one month before the NPC Full Congress convened. From 1989 on the NPC Finance and Economy Committee conducted the preliminary scrutiny, a preliminary scrutiny completed one month before the Full Congress opened. When the NPC Full Congress met in session, the draft budget was formally introduced by the State Council to the Presidium. Thereafter the Full Congress considered the Draft Budget according to the same procedure it applied to law bills. Of course it gave high priority to the draft budget.
Usually there were only five to ten days between the time when the Finance Minister reported the draft budget to the Chamber and the latter’s vote on it. At the same time the Delegations were conducting scrutiny on many other bills. Actual scrutiny time allotted to the draft budget and the plan was about three sittings. To air their opinions about the budget Deputies had to avail themselves of those three sittings.
It is striking to note that even the Finance and Economy Committee did not amend the draft budget directly during either its preliminary scrutiny or its parallel scrutiny with the Delegations. Rather, the committee simply put forth to the Ministry of Finance its opinions about the draft budget along with its suggestions about how to amend the draft budget during its preliminary scrutiny. Then the committee summed up opinions and suggestions from the Delegations about the draft budget during the session and wrote a unified scrutiny report to the Presidium. Then the Presidium passed the report on to the State Council and published it in official newspapers as well. As a consequence the State Council was allowed to decide amendments to the draft budget.
There are some examples of responsive amendments to the draft budget by the State Council in response to the opinions and suggestions of the NPC Finance and Economy Committee. A noteworthy example occurred in 1994 when the Ministry of Finance raised the growth-rate of revenue, narrowing the gap between the growth-rate of revenue and that of the GNP. The Finance and Economy Committee was proud that this change was a result of its suggestions.
The NPC Full Congress made more progress in its budgetary procedure by changing its final resolutions. Prior to the 8th NPC the budgetary resolutions passed by the Full Congress simply declared its approval for both the budget and the report on the budget by the State Council. The resolution passed in 1991 by the 7th NPC Full Congress in session 4 is a clear example:
“After scrutiny and in the light of the scrutiny report of the Finance and Economy Committee of the National People’s Congress, the 4th Session of the National People’s Congress decides to approve the 1991 state budget submitted by the State Council, and to approve the Report on the Implementation of the 1990 State Budget and the Draft of 1991 State Budget submitted by State Councilor and Finance Minister Wang Binqian. The session authorizes the National People’s Congress Standing Committee to scrutinize and approve the 1990 State Final Accounts.”
From the 2nd session of the 8th NPC Full Congress on, the Full Congress went beyond approving the budget and the budgetary report of the State Council. In addition it set forth administrative requirements for all levels. The resolution passed by the 2nd session of the 8th NPC Full Congress makes the improvement clear.
“The session accepts the various suggestions on how to fulfill 1994 state budget made by the Finance and Economy Committee of the National People’s Congress in its scrutiny report. Administrations at all levels are required to adopt an overall point of view, be strict in maintaining the state budget, be serious in implementing financial and budgetary laws and decrees and observe financial discipline. In implementing the budget, they shall reinforce both levy and management of the taxes, pay all their efforts to increasing the revenue, checking the expenditure, reducing the deficit so as to promote a sustained, rapid and healthy development of the national economy.”
This change shows that the NPC wanted to be more serious in exercising its power to approve the budget. Everyone understood that the requirements set forth in the budgetary resolutions passed by the NPC Full Congress were binding. They provided the NPC Standing Committee criteria for its subsequent oversight of the implementation of the budget as well as in its scrutiny of the final accounts.
2. Problems with the Procedure
Before 1999 the grand budgetary procedure was in operation for fewer than ten years. In that time several shortcomings became evident. Even to the NPC’s official view, the NPC Full Congress examination and approval of the draft budget was only a superficial procedure, substantial effects being hard to deliver. “People’s Deputies were really uncertain about questions concerning problems with the plan and the budget, and how numerous they were.” The State Council could, when it cared to, push its draft budget through the NPC Full Congress. The Full Congress would approve the draft budget even when the State Council accommodated nothing out of the NPC’s opinions and suggestions.
Problems with the Procedure of the State Council
Contemporary experts on the budgetary procedure in the State Council identify several major problems with its practices. First, it recorded expenditures according to the nature of the expenditures instead of department by department. Funds went into categories of administration, education, science and technology, capital construction, and so on. The sub-departments of each department or ministry went to the Ministry of Finance for this or that fund. Eventually neither the Ministry of Finance nor the department or ministry asking for funds knew exactly how much money was appropriated to the various departments. The Ministry of Finance struggled to control the total expenditures of each department. Each level of the administration hierarchy kept money for its own extra purposes. Soon the actual expenditures could turn out to be very different from those approved by the NPC Full Congress.
A second problem was the oversimplification of budgetary documents. Each year the budgetary papers submitted to the NPC Full Congress simply gave an explanatory report in four tables with brief notes. The four tables reported the national budget for the year, the central budget for the year, local budgets for the year and the central government’s funds for the year. From such limited information the NPC Full Congress could not comprehend the budgetary circumstances of the state.
In its budgetary management the Ministry of Finance applied four levels of appropriation in the budget. The levels are class, article, clause and item. But the budgets considered in the NPC Full Congress for scrutiny and approval usually gave the class figures only. The NPC gave no consideration to what were the article, clause and item values in the budget. Furthermore, the budget did not report some expenditures at all. They simply were approved as requested by administrative officials. Yao Sheng, a senior staff official of the Budgetary Work Commission of the NPC Standing Committee, criticizes the budget package “as at best a mere framework or outline of the budget,’ hardly understandable for the laymen and yet not intelligible for the expert’”.
Thirdly, the budget came to the NPC too late. In China the budgetary year begins on January 1 each year, but usually the draft budget from the Ministry of Finance was unfinished when reported to the NPC Finance and Economy Committee in February. The Finance Ministry’s tardiness extended the entire budgetary process in another sense. Even after the NPC Full Congress had already approved the budget, it took several more months for the Ministry of Finance
to fill out the budget and approve fund requests for each department. Some people mockingly say that the budget of one year was made throughout that year.
Problems with the Preliminary Scrutiny Procedure
Li Cheng, a penetrating young expert on the budgetary procedure of both the NPC and LPCs as well, together with his colleague Zhang Yongzhi, made a very thorough study of the problems in the NPC budgetary procedure prior to 1999. They identified problems in the preliminary scrutiny procedures of the NPC and LPCs. First, the law required the Ministry of Finance to report to the Finance and Economy Committee of the NPC the “major contents” of both the new budget and the implementation of the current budget one month before the session. However, no one was certain about the meaning of the phrase, “major contents.” There was no binding stipulation to define its meaning. The NPC Finance and Economy Committee was uncertain about what to do in the preliminary scrutiny. Second, participants did not know how to evaluate the preliminary scrutiny conclusion. Should the Ministry of Finance adopt opinions from the Finance and Economy Committee in its preliminary scrutiny conclusion? Should the Ministry of Finance account to the NPC because it did not adopt opinions from the preliminary conclusion? Should the preliminary conclusion and the Finance Ministry’s response be reported to the NPC Full Congress to help Deputies understand the situation? Third, which related committees were entitled to participate in the preliminary scrutiny?
Problems with the Scrutiny Procedure of the NPC Full Congress
The procedure for scrutiny of the budgetary package by the NPC Full Congress had to accommodate to the part-time presence of the NPC Deputies and the short sessions of the NPC Full Congress. That kind of procedure was ill designed for the highly specialized task of budget scrutiny. Wang Min is sharpest in his criticisms of the procedure and most constructive in his advice for reforms, expressed in his book cited above.
In the first place, the method employed by the NPC Full Congress to deal with the budget package was superficial in nature. All the Delegations and even the Finance and Economy Committee only discussed the budget generally. They did not analyze the budget class-by-class, subject-by-subject, or fund-by-fund. The Delegations utilized no division of labor.
Secondly and relatedly, the Delegation and sub-delegation constitute the basic deliberative units in the NPC Full Congress. That form of organization is not suitable for the highly specialized contents of the budget. Delegations and sub-Delegations were organized according to administrative geography. That simply did not correspond to the composition of the budget and could not facilitate Deputies’ understanding and discussion of the budget.
Thirdly, Delegate discussions focused on the budgetary report. Deputies usually address the Finance Minister’s report on the budget instead of discussing the four budgetary tables. To say it another way, Deputies missed their very target. The Finance Minister’s report was merely an explanation about the budget. The essential part of the budget was the four tables that contained the actual budget numbers.
Fourthly, time for scrutiny was too short. Each year when the NPC Full Congress sat in session only two or three days were available to the Deputies for scrutinizing the budget package together with the national economic and social development plan. In so short a time the Deputies could accomplish only a most limited and superficial scrutiny of the budget.
Fifthly, Delegations did not exchange views. Delegations simply talked among themselves. They did not even argue among themselves. Comments on the budget aired in one Delegation dug no deeper than those in the other Delegations. In other words Deputies usually repeated roughly the same superficial views about the budget.
The sixth problem spotted by Wang Min is that Deputies made no amendments. Some Deputies were experts on the budget. They did give quite specialized remarks on the budget and with good argumentation even demanded amendments. Yet the Rules of Procedure did not allow Deputies to amend bills of whatever sort. No mechanism functioned to assure that their highly valuable demands obtained accommodation in the government’s response.
There were other problems with the budgetary procedure of the NPC Full Congress. For example, the budgetary package came from the Ministry of Finance stamped as confidential. The packages were not sent to each Deputy. Li Cheng and Zhang Yongzhi object to this practice. They argued that the law did not list budgetary papers as confidential data. They questioned how Deputies could study the budget if they did not have the opportunity to read it.
3. Procedural Reforms in 1999
The 1999 Decision on Reinforcement of Scrutiny and Supervision of the Central Budget makes a remarkable reform of the grand budgetary procedure. The intention of the reform was not to change the budgetary power relationships among the NPC Full Congress, the NPC Standing Committee and the State Council as prescribed by the Constitution and the Budget Act. It did seek to flesh out the principle prescription about the grand budgetary procedure: that the budget must precede expenditures and that the expenditures must strictly abide by the budget. The reform did address some critical problems noted above. However, people who agree with Wang Min and Li Cheng’s criticisms will find that more reforms are needed.
The reforms put in place do change the budgetary mode in the State Council. As far as the NPC is concerned, the reform provides institutional reinforcement rather than procedural revolution. The reform placed three requirements on the way the State Council formulates the budget. It must draw up the budget on a department-by-department basis. It must spell out the budget in detail. It must draw up and present the budget according to timely deadlines.
The departmental basis for the budget means that each central department or unit that receives funds from the central budget shall put together all its revenues and expenditures and have the aggregate reported to the Ministry of Finance. It is also means that each departmental budget shall designate funds by clause and item to the sub-department or sub-unit that will actually expend the funds.
A detailed budget means that the Ministry of Finance must submit substantive information to the NPC Finance and Economy Committee for the preliminary scrutiny. It must provide the aggregate table of budgetary revenue and expenditure with funds listed at the class level. Important funds must be listed down to the article level. It must provide the budgetary fund table for the central government along with the revenue-expenditure table for all central budgetary departments. There shall be categorical tables of constructive expenditure and fund expenditure along with expenditure tables for some major projects. Expenditure tables shall report by categories the central finance’s returning funds or grants of subsidy to local governments. Expenditure tables shall have explanations by central finance regarding agriculture, education, science and technology and social security, and so on. It also means that the first class budgetary units shall draw up the regular expenditures of the central level. Constructive expenditures and fund expenditures from the central budget shall be reported by categories or by major projects. The total subsidiary expenditures from central finance for the local governments shall be reported by categories as well.
Timely deadlines require first that the Ministry of Finance submit all the required budget documents to the Finance and Economy Committee one and a half months before the NPC Full Congress sits in session. (Presently the Rules of Procedure of the NPC Full Congress and the 1994 Budget Act require only one month.) The State Council must submit the entire required package to the NPC Full Congress. Furthermore, the State Council must produce details of the draft central budget prior to the beginning of the financial year. The Ministry of Finance must complete its approval of all central departmental budgets within thirty days after the NPC Full Congress approves the central budget.
The reforms made two changes in the NPC. The more important one is that now the Budgetary Work Commission is formally incorporated into the budgetary procedure. The 1999 Decision on Reinforcement of Scrutiny and Supervision of the Central Budget prescribes that in the preliminary scrutiny stage the Ministry of Finance shall report to the NPC Finance and Economy Committee and to the Budgetary Work Commission of the NPC Standing Committee. This changes the stipulation in article 31 of the Rules of Procedure of the NPC Full Congress. Previous Finance Ministry reports for preliminary scrutiny went to the NPC Finance and Economy Committee, “and other special committees concerned.” The budgetary decision authorizes the Budgetary Work Commission to assist the Finance and Economy Committee in the preliminary scrutiny of the budget, in scrutiny of the final central accounts, in scrutiny of budgetary adjustment measures and in other activities involved in the budgetary procedures of the NPC Full Congress and of the NPC Standing Committee as well. The Budgetary Work Commission provides badly needed specialized support to the NPC in the budgetary process. The other change deriving from the reform is the factor of time. From now on the time provided for preliminary scrutiny of the central budget shall be one and a half months, instead of one month, before the NPC Full Congress sits in session.
For the time being these are the reforms applied by the NPC Full Congress procedure on the central budget. Several valuable reform suggestions raised by Wang Min are not adopted. He proposed to hold discussions of the budget that focused on specific subjects in the Chamber. Currently the NPC Full Congress practices a package scrutiny on the draft budget. Deputies discuss the budget as a whole, or on whatever points they choose. Wang Min advocates specialized examination based on the package scrutiny. Deputies with similar interests should organize to question matters of mutual concern that affect the budget. For example, Deputies of the various Delegations from the same industry or profession could join in a subject-examination on the budget’s parts that affect agriculture, industry, and other similar interests.
There should be a stage in the process when Deputies can speak and even debate in the Chamber about the draft budget. Consideration in the Chamber should come before the vote on the budget. The NPC Full Congress should receive feedback from the NPC special institutions, the NPC special committees, work commissions and the General Office of the NPC Standing Committee. They should report to both the Presidium and to the Chamber about how the budget resolves questions that Deputies have raised, which ones the State Council has under consideration and which ones cannot be solved for the time being.
The NPC Full Congress deserves greater feedback from the State Council. The State Council should report to the Chamber its responses to Deputies’ opinions and suggestions about the draft budget. What are the amendments it has adopted in response to the NPC’s views? Why does it not adopt other suggestions? These forms of information could fuel greater debate in the NPC. So would the right for each Delegation, or Deputies joined together, to move amendments.
Key budget issues deserve greater scrutiny by Deputies. Given the practical shortage of time for scrutiny during the session, it is simply unrealistic to expect Deputies to examine every point of the budget. In fact the Full Congress examines the draft budget in a simplified fashion, too simplified for all Deputies to grasp some of the highly important budgetary topics. Wang Min suggests that the Full Congress should adopt a key-targets-examination. Deputies should be guided to use their brief time to examine the key targets of the draft budget. Are strategic targets too high or too low? What about industry policies? Are expenditures for agriculture, industry, education, health, and other policies sound and favorable to a well-balanced national economy framework? Do the total revenues and total expenditures balance?
In addition, many reform ideas from Li Cheng did not find their way into the reform either. For example, the budgetary decision does not declassify the budgetary tables. Therefore Deputies will most likely have to go to their Delegation heads if they insist on reading the detailed budgetary tables.
H. The NPC Standing Committee’s Procedure for
The procedure of the NPC Standing Committee to scrutinize and approve budgetary adjustments and the final accounts did not receive much attention in the 1999 reform. Although changes were small, the procedure has evolved.
1. Previous Procedures Regarding Final Accounts and
In every June session of the NPC Standing Committee the State Council introduces the final accounts for the previous financial year and reports on it. From 1996 on, the State Council added another report to the NPC Standing Committee session in June. It is the Audit Report on the Implementation of the Central Budget and on Other Revenue and Expenditure.
Another responsibility of the NPC Standing Committee is to examine and approve the final accounts. Also it scrutinizes the audit report. It may choose to adopt or not to adopt a resolution on the report. The procedure that the NPC Standing Committee follows in dealing with the final accounts and the audit report are the same as its legislative procedure. Understandably it is the Finance and Economy Committee rather than the Law Committee, which guides the Standing Committee in these matters.
For budgetary adjustments the NPC Standing Committee rules prescribe no special procedures. Put another way, the NPC Standing Committee scrutinizes the budgetary adjustment bill in the same way it legislates. The Finance and Economy Committee has the responsibility to advise the Standing Committee. Until 1998 the State Council never reported budgetary adjustments to the NPC Standing Committee, a fact that worried some members.
The State Council can cite Article 53 of the Budget Act as grounds for its past nonreporting practices.
Article 53 of the Budget Act defines “Budgetary Adjustments” as that the balanced budget approved by NPC Full Congress is turned either into total expenditure exceedingtotal revenue, or into more debt being borrowed than the sum approved by the budget, with both cases being caused by necessary increase of expenditure, or reduction of revenue during the implementation of the approved budget. According to statements made by Finance Minister to each session of the NPC Full Congress since 1995, deficit of every year has been kept within the limit set by the budget and so for the State Council there is no budgetary adjustment to report.
In response to people’s criticism the NPC Standing Committee exercised its power to make adjustments to the budget. The State Council reported to the 4th session of the 9th NPC Standing Committee that the original deficit target approved by the NPC Full Congress for the year needed to be raised from 46 billion yuans of Renminbi to 96 billion yuan, an increase of 50 billion yuans. The State Council argued that the 50 billion yuans were needed to stimulate market demand. Members discussed the request for one sitting of the panel scrutiny. They agreed to raise deficit spending by 50 billion yuans to fuel the economy with a supply of capital. They also reminded the State Council to take care to ensure that the 50 billion yuan be invested into designated industries in order not to give rise to inflation. Finally, the Floor voted for a resolution to declare the NPC Standing Committee’s endorsement for the partial budgetary adjustment measure introduced by the State Council. It required reporting the budgetary adjustment to the next session of the 9th NPC Full Congress. The resolution required unified understandings about the important measure to raise state debt for infrastructure projects. It called for sound investment priorities so that the money went to those industries most influential to the economy. It warned about future oversight from the NPC Standing Committee over major new projects.
2. Problems with the Previous Procedures
The previous procedures suffered from several shortcomings. The first is that the NPC did not put to good use its procedures for budgetary adjustments. Many people worried about the helpless state of the NPC Standing Committee when it dealt with budgetary adjustments. The very definition of a budgetary adjustment given by the Budget Act was problematic. Critics believed that budg
etary adjustments did take place, but the State Council did not report them. The real problem was that the threshold set in the Budget Act to require the State Council to report budgetary adjustments to the NPC Standing Committee was too high. In order to trigger the procedure the threshold needed to be lowered.
Li Cheng recommended several criteria that he believes should trigger a requirement that the budgetary adjustment measure be reported to the NPC Standing Committee before any act of its administration could be taken.
1) When an expenditure increase or revenue reduction would break the balance of the approved budget, caused either by the increased expenditure exceeding the original expenditure target of the approved budget by over 3%,or by the reduced revenue accounting for over 3% of the original revenue target of the approved budget.
2) When an expenditure increase of 1.5% or more and a revenue reduction of 1.5% or more would change the approved balanced budget into deficit spending.
3) In case actual revenues exceed the budget’s target and expenditures necessarily rise, when expenditure increases exceed 10% of the revenue increase, even if those increases do not cause overall deficit spending.
4) When the government reduces both spending and revenues more than 5% of the approved balanced budget, even when those changes do not break the balance of the approved budget.
5) When the government shifts funds across categories of the budget that exceed 20% of the approved amount, even if the changes do not break the balance of the approved budget.
In addition Wang Min advocated a prescription that any expenditure increase exceeding 1% of the total expenditure set in the budget should not be implemented until it was reported to and approved by the NPC Standing Committee.
An even stricter requirement would insist that any reduction of expenditures for agriculture, education, science, health and the like should be reported to and approved by the NPC Standing Committee prior to its implementation. So also should any increase in the deficit, administrative costs, capital construction and the like obtain prior approval from the NPC Standing Committee. The State Council should report all the budgetary adjustments to the NPC Standing Committee by a deadline no later than the third quarter of each year.
Additional changes deserve consideration. In order to serve as reliable staff and advisors, the NPC Finance and Economy Committee and the Budgetary Work Commission of the NPC Standing Committee should pay greater attention to the final accounts and all partial budgetary adjustments. They should maintain monthly contact with the Ministry of Finance about the implementation of the budget so that they are able to advise the NPC Standing Committee about the acceptability of final accounts and all budgetary adjustments.
Both the procedure on budgetary adjustment and that on the central final accounts need reform. Wang Min’s suggestions for reformed procedures in the NPC Full Congress regarding the budget apply here too. The NPC Standing Committee’s procedure on budgetary adjustment and on the final accounts needs reforms for selective and specialized scrutiny, debate, Floor discussion, amendment and the like.
3. The 1999 Reform
The 1999 budgetary decision introduced some reforms to the NPC Standing Committee’s scrutiny and approval of budgetary policies of the State Council. Strictly speaking, however, these reforms stress the State Council’s obligation to obtain approval from the NPC Standing Committee. The procedures that the NPC Standing Committee applies to the budgetary bills of the State Council go largely unchanged. Previously I described how the NPC Standing Committee deals with budgetary bills of the State Council in part F, above. However, some beginning but encouraging improvements have been reported since the 1999 reform. As revealed by Ju Jiaren, Director General of the Office of the 9th NPC Finance and Economy Committee, the Ministry of Finance began to formulate the 2000 budget on a ministry by ministry basis. It submitted for the first time to NPC aggregate budget tables of the next four ministries: Minstry of Education, Ministry of Agriculture, Ministry of Science and Technology and Ministry of Labor and Social Security. Then Chairman Li Peng reported to the 5th Session of the 9th NPC Full Congress that in the year 2001 the State Council submitted budgets for twenty-six ministries to the NPC and that the NPC Standing Committee carried out scrutiny over these ministry budgets. I would say that this is a fairly large step forward by the State Council to implement the 1999 reform.
Over recent years the NPC has made progress exercising its decision-making powers. The NPC’s difficulty with its decision-making power is not in delineating the sphere of its power. The difficult issues are its procedures for exercising the power it has. The constitutional environment for the NPC is improving. The Communist Party is gradually withdrawing from the spheres of legislation and decision making assigned to the NPC by the Constitution. Increasingly it is possible and even obligatory for the NPC to play its part actively. The State Council and the other constitutional branches all show their growing respect for the NPC’s power to make decisions for them. They execute decisions by the NPC with growing seriousness. These changes certainly constitute tangible evidence that China is achieving the rule of law. The practice of yearly formulation, scrutiny and approval and implementation of the central budget demonstrates that the NPC regularly exercises its power to make budgetary decisions.
The much-needed 1999 budgetary reform is in place. With this reform in effect the NPC at last joins many of the world’s legislatures that make strategic use of the budget to keep the government under control. The reformed NPC can begin to exercise its power over the budget in a more professional fashion. Loose, general and superficial approval of the budget is no longer acceptable in the NPC. The NPC is determined to pull the strings of the purse and be strong in state finance.
The four measures adopted in the reform package, providing a departmental budget, a detailed budget, a timely budget and the Budgetary Work Commission as the watchdog, are right in themselves. They provide indispensable tools for keeping government spending in line with the budget approved by the NPC.
If these reforms fail to realize their purposes, then the reformers must blame themselves for failing to improve the budgetary procedure of the NPC Full Congress. The current budgetary procedure of the NPC Full Congress remains too general. On one hand, the Deputies have only a superficial understanding of the draft budget. On the other, by not amending or rejecting the draft budget, they are too pliable. The NPC has yet to learn that it cannot really exercise strong control over the budget when using such superficial and pliable procedures.
If the reforms fail, another lesson for the reformers may be that the reforms failed to address the most critical issue, the responsibility that the government must take if ever the NPC Full Congress decides not to approve its report on the budget or the budget itself. The Constitution and the 1994 Budget Act chose not to prescribe the government’s responsibility. However, the government’s lack of accountability in the budgetary field contradicts the basic constitutional principle that the government is responsible to the NPC. The 1999 budgetary reform simply permits this absence of accountability to continue. Such pliancy actually fostered arbitrariness by the government in its past expenditures. The NPC engages in consultation. However consultation will not likely succeed without sanctions to support it.
As for the NPC Standing Committee, its procedural difficulties with scrutiny and approval of budgetary adjustments confirm the urgent need to modify its threshold criteria. Clearly the definition of budgetary adjustment given by the Budget Act is not sound. An urgent amendment of the definition will pave the way for the NPC Standing Committee to play an active role maintaining the binding force of the budget. It can hold budgetary adjustments within reasonable limits allowing budget implementation that is flexible enough to adapt to changing situations but not so pliable as to prevent the NPC Standing Committee from exercising its proper power over budgetary adjustments. The flawed 1999 budgetary reform neglects adequate threshold criteria.
The NPC Standing Committee’s procedures for scrutiny and approval of budgetary adjustments or final accounts continue to need change. The Rules of Procedure for the NPC Full Congress provide a procedural context regarding how the body should scrutinize the draft budget. It is quite regrettable that the Rules of Procedure for the NPC Standing Committee make no mention at all about the final accounts and budgetary adjustments. The general legislative procedure can hardly suffice for the special requirements about decisions over the final accounts and budgetary adjustments. The reformers have not recognized this vital distinction and so have overlooked steps to improve the NPC’s procedures on budgetary bills from the State Council. I remain skeptical about whether or not the NPC Standing Committee can maintain the soundness of the budget using such a general procedure.