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The budgetary reform to reclassify government revenues and expenditures is an important step towards greater transparency in the country's public finance.

The Chinese government has made the reform a priority this year, and is ready to put it into practice next year.

Classification of government revenues and expenditures is closely related to the transparency of budget control, and scientific and standard management of public spending.

The reform will expand the scope of government revenues to include both budgetary and extra-budgetary funds, while categorizing them in line with international standards.

More important, it will sort government expenditures by actual functions and economic activities. In the past, fiscal funds were classified by the nature of the entities that made use of them.

Such budgetary changes will undoubtedly provide a clear description of how public funds are spent.

Mainly a technical adjustment at the first glance, though, the budgetary reclassification embodies a significant change in the country's understanding of public finance.

On the one hand, the Chinese authorities have keenly realized that the current budgetary classification is outdated as the national economy shifts from central planning to a market economy.

As the government adapts itself to market-oriented reform and assumes an increasing role in providing public services, the structure of budgetary revenues and expenditures will change. But the old budgetary classification, smacking of too much government interference in allocation of resources that should be left to the market, failed to reflect the new reality of the country's public finance.

On the other hand, the budgetary reform shows that the government has recognized the need for more supervision on public spending both by itself and by the public.

An all-inclusive and transparent budgetary system will enable the central authorities to strengthen their supervision of the use of public funds by various government departments and entities, preventing corruption through an institutional approach.

Meanwhile, a clear-cut classification of government revenues and expenditures will help dispel public suspicions on how budgetary funds are spent.

For instance, in spite of the Chinese government's efforts to tilt the national budget in favor of agriculture, education and scientific research, public complaints about lack of fiscal support remain very loud.

The gap between government expenditure and the huge lack of funds in these sectors is surely a key reason.

Nevertheless, the confusion caused by the present budgetary classification should not be ignored. By breaking government expenditures into little pieces and hiding it in various categories, the old budgetary system made it very difficult for people to figure out how much the government had actually spent on different things.

As revenues rapidly increase, the country has a growing need for fair and efficient use of public finance.

And as the government seeks to change the lopsided structure of its expenditure, public support is crucial to making better use of public finance to facilitate various social causes.

A more transparent budgetary classification can make the public better informed, and quicker to achieve consensus.

(China Daily March 14, 2006)