Towards monitoring and managing subnational liabilities in china: Lessons from the balance sheet for county K

Abstract

The monitoring and managing of subnational liabilities is taking on considerable importance in China. Considerable efforts have been underway to strengthen national institutions and public financial management processes and procedures-this includes the move towards a GSFM2001/14 budget system that ensures consistency of fiscal information with national accounts. In essence, this requires the development of balance sheets at different levels of government to generate full information on general government operations. We use a detailed survey from an advanced county, K, in Jiangsu Province, that has started developing a local balance sheet. This shows considerable gaps and lacunae that need to be addressed to be certain that the full magnitude of liabilities is being captured, and that appropriate measures to address these are formulated at the local level. Otherwise there is a danger that liabilities will continue to be generated in the expectation that the central government will eventually provide, despite the recent strengthening of the budget law in this regard. Without own-source revenues, no bailout sanctions are not credible, especially if the information base is incomplete.