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China to Revise Government Investment Regulations

News, page 4
Translated by Tony Liu
Original Article:

China’s National Development and Reform Commission (NDRC) is revising its “Regulations on Government Investment,” looking to curb municipal and county government power over local government investment projects.

The Department of Law and Regulation and the Department of Investment at the NDRC recently summoned local officials from 14 provinces to discuss the revisions.

A participant at the meetings revealed to the EO that the NDRC intends to shift jurisdiction over certain government investment projects, currently scattered across various ministries, to itself and several development and reform commissions.

In addition, the NDRC plans to move final approval on local government investment projects to the provincial or national level.


Projects using funds allocated from the fiscal budget, including earmarked construction funds, foreign debt funds, and several others, fall under the category of government investment.

The EO has learned that in recent years, government investment hovers at around 2 trillion yuan per year, and accounts for some 10 percent of the country’s annual investment.

However, scandals including official corruption and jerry-built and redundant projects have plagued government investment projects in recent years.

In response, the State Council proposed and drafted an official “Regulations on Government Investment” in 2001, but nearly nine years have passed, and the “Regulations” have yet to be implemented.

Since the central government launched a 4-trillion yuan stimulus package in 2008, a portion of the investment funds allocated by the central government have been embezzled. In addition, certain funds, earmarked for investment in social welfare projects, were instead funneled into business projects.

Chinese Premier Wen Jiabao has since ordered the implementation of a set of regulations to supervise government investment. Later, the Central Commission for Discipline Inspection of the Communist Party of China (CPC) also urged the NDRC to carry out regulations on government investment.

Revoking Local Power

According to a source familiar with the issue, the reason the regulations have yet to materialize is that the central government and local governments never reached a compromise on the division of power.

At present, China adopts an examination and approval system for government investment projects. The NDRC is responsible for examining and approving the central investment projects; those related to railway, highway, water resources and environmental projection require approval by other ministries.

In addition, the NDRC is responsible for reviewing large local investment projects related to national security and cross-region cooperation.

Local governments currently have jurisdiction over their own investment projects. And, project approval at the local level is still scattered among various departments.

“The NDRC hopes to concentrate jurisdiction over certain government investment projects, including projects related to highway construction, railway construction, agriculture, and water resources in its own hands,” said the above source.

Meanwhile, the NDRC wants to revoke municipal and county government power over local investment projects and shift the ultimate power of approval to the provincial or national level, he added.

The EO understands that regulations do not guarantee accountability for any misuse of government investment funds.

Luo Songshan, a researcher at the Research Institute of Investment under the NDRC, identifies the major problems in government investment projects to be unscientific and imprecise decision-making, as well as unclear management and supervision requirements.

He added that if these problems remain unaddressed, corruption will continue to occur in government investment projects.

This article was edited by Ruoji Tang

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