China aims to create a standardized risk-warning system to better handle government debts, the Communist Party of China (CPC) said in a policy document released on Friday.

The document on major issues concerning comprehensively deepening reforms was approved by the Third Plenary Session of the 18th CPC Central Committee, which ended on Tuesday.

Mounting government debts have led to concerns over the health of the Chinese economy.

The creation of a risk-warning system, as part of the reform plan to improve the country's budget management, highlights the CPC's effort to deepen its reforms in the fiscal and taxation system in a bid to overhaul the world's second largest economy.

A scientific fiscal and taxation system optimizes allocation of resources, promotes fairness and provides institutional guarantee for the country's long-term stability, the document said.

To this end, China has to improve legislation and budget transparency, reform on taxation, establish a modern fiscal system, clearly define responsibilities between central and local governments and mobilize their activities, it added.

China will deepen its reform on taxation, which includes improving the local taxation system, gradually raising the proportion of direct tax, advancing value added tax reforms and simplifying taxation, the document said.

It will adjust the scope of taxation to encompass energy-consuming and high-polluting products.

It will also step up legislation on property tax.

China will establish a system whereby both the central and local governments should have financial resources proportionate to their duties and responsibilities, according to the document.

The central government is in charge of matters concerning national defense and security, foreign affairs, and the overall national market policies and management, while regional affairs are overseen by local governments.

Matters concerning social security and the building and maintenance of major cross-regional projects will be co-managed by central and local governments.

Money spent for the management of those affairs will be managed either by central and local governments separately or jointly.