Problems in China’s Government Budget Management
and Future Reform Directions

YAN Jie

Mini Review Article

Problems in China’s Government Budget Management and Future Reform Directions

YAN Jie*

Yangtze River Economic Belt Research Institute, RUP；Finance & Taxation School of SWUF

Corresponding Author

Received Date:April 26, 2025; Published Date:May 16, 2025

Abstract

Government budget reform is a core component of deepening fiscal and taxation system reforms and a crucial lever for advancing the modernization of national governance systems and capabilities. In recent years, China has made progress in budget transparency, performance management, and cross-year budget balancing. However, significant challenges remain. In 2024, China’s general public budget revenue reached approximately 21.97 trillion yuan, a year-on-year increase of 1.3%. Central government revenue accounted for 10.04 trillion yuan, up 0.9% year-onyear, while local government revenue stood at 11.93 trillion yuan, rising by 1.7%. On the expenditure side, total public budget expenditures amounted to 28.46 trillion yuan, a 3.6% increase. Central government expenditures grew by 6.5% to 4.1 trillion yuan, and local government expenditures increased by 3.2% to 24.39 trillion yuan, driven by increased central government transfers to support grassroots public services. China’s government budget has effectively mobilized public funds to drive domestic economic growth and improve public welfare. Nevertheless, persistent issues in budget management necessitate further reforms to refine the system [1].

Major Problems in China’s Government Budget Management

Insufficient Budget Transparency and Public Participation

Notwithstanding ongoing efforts to enhance budget transparency, fragmented or ambiguous disclosures by some local governments continue to impede public oversight. While the Budget Law of the People’s Republic of China (2018 Revision) explicitly mandates transparent budgeting, persistent implementation gaps—such as overly simplistic departmental budget breakdowns and disjointed disclosure platforms—undermine accountability. Mechanisms for public participation in budget decision-making remain underdeveloped [2].

Incomplete Budget Performance Management

The 2018 Guidelines on Comprehensive Performance Management of Budgets proposed a holistic performance management framework. However, execution remains weak, with a focus on allocation over outcomes. Performance targets are often ambiguous, evaluation results underutilized, and fund efficiency suboptimal.

Immature Multi-Year Budget Balancing Mechanism

The current system prioritizes annual budgets, lacking longterm fiscal planning. This has led some local governments to overrely on land sales or debt financing, threatening fiscal sustainability. While the Budget Law permits medium-term fiscal planning, multi year balancing mechanisms remain underdeveloped in practice [3].

High Pressure to Control Local Government Debt Risks

Hidden local debt remains a critical risk, as some regions rely on financing platforms or PPP projects to bypass debt ceilings, potentially triggering systemic financial vulnerabilities. In 2024, outstanding local government debt totaled 47.54 trillion yuan (16.71 trillion yuan in general debt and 30.84 trillion yuan in special debt). Despite central directives to curb hidden debt, balancing development and risk prevention remains challenging.

Weak Alignment Between Budgeting and Policy Goals

Budget formulation lacks synergy with macroeconomic, industrial, and regional development strategies. Duplicate funding or underinvestment in key areas undermines policy effectiveness.

Future Directions for China’s Government Budget Reform

To address the above challenges, future reforms should focus on the following directions:

Enhancing Budget Transparency and Public Oversight

Future reforms should refine budget disclosure by mandating detailed departmental budgets, project expenditures, and performance targets. Digital tools (e.g., big data, blockchain) can improve transparency. International practices (e.g., public hearings) and domestic pilot projects (e.g., Zhejiang’s citizen budget review trials) should be integrated to institutionalize public participation.

Deepening Performance-Based Budgeting

Reforms should prioritize scientific performance targets, standardized evaluation systems, and linking results to budget allocations. Inefficient projects should face zero-based budgeting or funding cuts. Third-party evaluations could enhance objectivity and credibility.

Improving Multi-Year Budget Balancing Mechanisms

Medium-term fiscal plans should align with the 14th Five-Year Plan to ensure policy continuity. A budget stabilization fund could mitigate fiscal volatility across years.

Strengthening Local Government Debt Management

Reforms should optimize local bond markets, improve debt structures, and enforce risk assessments to curb hidden debt. Pilot programs for “fiscal bankruptcy” mechanisms could incentivize fiscal discipline.

Aligning Budgets with National Strategies

Budgets must better support major initiatives like carbon neutrality, rural revitalization, and technological innovation. A “policy-budget-performance” integration model would ensure precise funding allocation.

Conclusion

China’s budget reforms face challenges in transparency, performance management, and debt control. Future efforts should prioritize these areas to build a modern, efficient, and sciencebased budget system. Systemic reforms will be key to achieving high-quality development and national governance modernization.

Conflict of interest

None.

Acknowledgement

None.

References

(2018) Budget Law of the People's Republic of China (Revision).
(2018) Guidelines on Comprehensive Performance Management of Budgets (State Council).
(2021) Opinions on Further Deepening Budget Management System Reforms (State Council).