February 8, 2018 / 12:19 PM / 10 months ago

China issues rules clarifying spending on public services as it pushes reform

BEIJING (Reuters) - China on Thursday laid out specific rules on how costs for public services like education will be split between the central and local governments, as it looks to standardize and improve government services.

The ratios between central and local government spending for different provinces and regions will be based on the fiscal resources of the local government, the State Council, China’s cabinet, said in a notice.

The changes are the latest step in China’s efforts to improve its system for government finances and spending in which there is some overlap between central and local government responsibilities, while much of the spending burden falls on local governments that have widely varying fiscal resources.

New rules will “standardize the breakdown in responsibility for spending between the central and local governments, increase inputs in basic public services, and speed up equalization of basic public services (across regions)”, the council said.

Analysts believe China needs to push through some painful changes, such as fixing the fiscal system to reduce the burden of debt-laden local governments and overhaul state-owned firms.

The State Council has said previously that the central government would take on more spending responsibilities in order to ensure public security and equality, and local governments would be given authority to manage some public services in order to better meet local needs.

According to the new rules, the central government will be responsible for 80 percent of spending to provide compulsory education and basic health services in poor provinces such as Gansu and Yunnan, while the ratio drops to 10 percent for Shanghai and Beijing.

The central government should also “effectively increase guidance and supervision of spending responsibilities of local authorities”, the Ministry of Finance said in a statement on its website about the new rules.

The rules go into effect on Jan. 1, 2019, with a target to complete work on clarifying responsibilities for public services by 2020.

Reporting by Elias Glenn; Editing by Robert Birsel

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