Study On Institutional Reform Path To The Medium-Term Budget In China

The Medium-Term Budget, or so-called Medium-Term Expenditure Framework(MTEF), Medium-Term Budget Framework(MTBF) in global, refers to as the government forecasts, allocates, coordinates and regulates disposable fiscal resources, which are not sufficient enough, based on strategic target of promoting social resource allocation efficiency or equity, finally into forms of budget formulation, execution and reporting as the legal procedure to reflect all kinds of public strategic activities, comprehensively and reasonably, in a medium term. The earliest MediumTerm Budget system originated form the UK, and nowadays, there are more than two third of countries in global which have implemented the MTEF system, with increasingly mature of the MTEF theories. Compared with other countries, China has made it started to the reform of budget balance mechanism beyond years. As the transition form of the Medium-Term Budget system, the measures of Medium-Term Fiscal Plan are taken into effect, and still so crude that need more improvement. Realizing the transition from the MTFP to the MTEF is greatly important content of comprehensively deepening reform of modern fiscal system and a vital path to promote the modernization of the governance system and governance capacity.The object of this paper is the reform of Medium-Term Budget System. Through the method of normative analysis and comparative analysis, the paper tries to find a way to establish a sound and constantly Medium-Term Budget System, and to answer these following questions: I. Why should China establish a Medium-Term Budget System? I. What is the condition and system construction of a Medium-Term Budget in theory? I I. Compared with the MTEF system, what are institutional deficiencies and problems in practices of the MTFP in China? IV. According to the experience and successful cases in the global, what enlightenment and Inspiron are brought to China? V. Finally, how to gradually improve the Medium-Term Budget System?This paper is divided into 7 chapters with following more details:Chapter I is literature review on Medium-Term Budget System abroad and domestically. The origin of the MTEF theory is from the cyclical balance budget theory proposed by Alvin Hansen in 1940 s, and in 1998, the World Bank first give the define of MTEF for guidance. Nowadays, the topic of the MTEF theories research is how to blueprint and improve a new MTEF system. The studies on Medium-Term Budget in China started a little late, and mainly focus on how to establish and improve our Medium-Term Budget System only.Chapter II is theoretical description of Medium-Term Budget. This Chapter consist of concept, theoretical significance on Medium-Term Budget, and relative theories which includes budget budgetary principle and budget decision model. These theoretical descriptions give a guidance for establishment and development of Medium-Term Budget in China.Chapter I I introduces a standardize process and institutional factors of MediumTerm Budget System, including goals, preconditions and mechanism framework of the MTEF. According to the World Bank, the process of a Medium-Term Budget System consists two aspect: setting fiscal goal and distribution of financial resources. Institutional factors of Medium-Term Budget are divided into three dimension: general factors, technical factors and organization factors. When designing a Medium-Term Budget System, much attention should be focused on macro-economic and fiscal forecast, comparative intra-department distribution mechanism of financial resources, expenditure ceiling of budget department and the cohesive mechanism with annual budget.Chapter VI is mainly the practices and exploration about the Medium-Term Budget system with contents of Medium-Term Rolling Budget and the MTFP. China has taken steps to One Province, One City and One Country experimental implementation of the Medium-Term Rolling Budget, with a result of not only fruitful achievement of promoting fiscal efficiency, but also a series of problems and challenges, which leading to the failure of these experimental measures. In 2015, China implemented the MTFP system widely as transition form of the MTEF.Chapter V mainly analyzes the problems and challenges China faced up to in practices of the Medium-Term Budget system. On on hand, the experimental implementation indicates that the economic and institutional environment in China at this stage are not fit to implementation of the Medium-Term Budget system. Nowadays, China is faced up to questions of a hard period of reform, the authority and responsibilities of expenditure which should be made more clear, discordance between policy, planning and budget, budget management system to be improved, a big amount of government implicit debt. On the other hand, compared with Medium-Term Budget system, there are lots of institutional deficiencies, such as crude institutional design leading to limited effect of guidance, in the absence of Macro-Economy & Fiscal Forecast mechanism, weak legal status and legal force, weak mechanism design about resources allocation and organization, etc.Chapter VI is the institutional comparison of Medium-Term Budget. On one hand, the paper choses CECD countries and nine Africa countries which implemented MTEF recently as the sample and make an institutional comparison. On the other hand, the paper compares the MTEF practices between China and other countries. We get the Conclusion that the mechanism of medium-term fiscal plan need to be complete, because there are similar design in medium-term fiscal plan where institutional factors are convergent among other countries, and institutional absence where institutional factors are different among other countries. Aiming to the institutional deficiencies in China, the paper choses successful case about America, South Africa, Sweden and Australia as reference.Chapter VII gives advice to the way of reform on Medium-Term Budget System. According to the characteristics and developing stage of medium-term fiscal plan, we suggest that traditional MTEF development stages are not fit in China; we should realize the transition from medium-term fiscal plan to the MTEF at first, and then should follow the traditional MTEF development stages. The paper gives our suggestions in the following aspects such as quickening the forming of Medium-Term Budget legislation, establishing the mechanism of macro-economic and fiscal forecast and strategic planning, unifying the budgeting of department expenditure plan, making it cohesive between Medium-Term Budget and annual budget in budgeting process, improving management construction of Medium-Term Budget, etc.