The National Treasury Might Become the Private Treasury of the Ministry of Finance
In the revision of the Budget Law, a key regulation, “the central national treasury operation is managed the People’s Bank of China”, was deleted and revised as the following: “the specific methods of the national treasury management are determined by the State Council”. Such a change has become one of the focus issues surrounding the revision of the Budget Law.
Why should the national treasury management system by the central bank be cancelled? In the views of many experts — especially those coming from financial system, it is about to be compatible with internationally accepted practices and fully reflect the ideas of modern national treasury management, i.e. “the national treasury not only refers to the state treasury, more important, it also refers to a series of management functions of the finance department that represents the government to control the budget enforcement and guard the government assets and liabilities.” Thus, it is an international practice that the Ministry of Finance, and not the central bank, to control the national treasury. In other words, the current “national treasury management system” in China does not conform to the international practices, and therefore, should be changed.
Indeed, there is very few country that has central-bank-managed system, and most countries carry out the trusted national treasury system. Taking the OECD countries as examples, there are mainly two types of institutions, i.e. the independent national treasury institutions and the inner institutions of the Ministry of Finance. Thus we know that the financial national treasury system is indeed not popular around the world. But within the OECD countries, no matter the independent national treasury institutions or the inner institutions of the Ministry of Finance, they mostly follow the principle of “the single account of national treasury”, i.e. all the financial funds are concentrated on the account of one bank, and all financial expenses shall use this account to directly allocate money to commodity suppliers or labor providers.
If using the single account of national treasury” to evaluate the Chinese national treasury system, we may find that many problems exist in the current revisions of Budget Law. Before the reform in 2001, China carried out “the single account of the national treasury”, i.e. all financial incomes were brought into the national treasury of the central bank. Due to the large amount of non-tax incomes usually existing in all local governments, all local financial departments have broken through the regulations in the Budget Law and the Law on the People’s Bank of China. There are large amount of special financial accounts, nearly 200 thousand, out of the commercial banks at present. However, these scattering special financial accounts will all have been legalized through “the single account system” in the revision of law.
If you really understand the Chinese special financial account system, you will know that how much troubles have been caused by the national treasure system whose finance departments are overwhelmingly powerful. Due to the huge sums of the special financial accounts, they become the objects that commercial banks strive for. Such a system of special financial accounts without supervision in many places has become a private coffer for the financial departments or the department leaders to deliver interests. The case that Zhang Meifang accepted bribes of nearly 100 million yuan as the former vice director of the Financial Department of Jiangsu Province, is an example. In fact, the occurrence of such a phenomenon is not limited in Jiangsu, but exists in many places in China more or less, and many persons in charge of budgets in financial bureaus have become prisoners due to this reason.
Why the national treasury shall be managed by the People’s Bank in China? It is determined by the special financial system in our country. Due to the short session of the National People’s Congress, it is unable to carry out strict supervision for the budget of the Ministry of Finance. Therefore, the national treasury is established within the government departments so as to avoid the situation that the financial departments are overwhelmingly powerful: the financial funds are directly allocated to the accounts of the budget units, and the national treasury can timely find out and stop the allocations to non-budget units and illegal allocations through the item-to-item checking on each expense by the national treasury. Viewing from the past practices, the central-bank-managed national treasury system indeed played such a role. According to the incomplete statistics of the central bank, from 2006 to 2010, the national treasuries at all government levels prevented 1.14 million items of illegal operation, involving a total amount of 44.41 billion yuan.
Viewing the common operations of the financial budgets of all countries, if there is a convention, it is the system of single national treasury in form, and the separation of powers for balance in idea. But looking into the draft of the Budget Law, the system of single national treasury of the central bank has been without foundations due to the system of special financial accounts; the central bank’s supervision on financial expenses also had been replaced by the combination of “both the cashier and the accountant” of the Ministry of Finance. This will generate very bad influences on the Chinese public finance. If things go on like this, the national treasury without the supervision of other departments will become the “private treasury” of the financial departments, and it deserves the attention of all people.
Published on the 21st Century Business Herald on August 10, 2012
