Essay Example on Research on Governmental Budget Accounting Reform and Management in China

Published: 2023-10-09
Essay Example on Research on Governmental Budget Accounting Reform and Management in China
Essay type:  Evaluation essays
Categories:  Government Asia Accounting Policy analysis
Pages: 7
Wordcount: 1675 words
14 min read

Finance plays a major role in running any country, and China employs strategies and continually makes reforms to the system to maintain its operations and fight corruption. China is focused to constantly modernizing its financial institutions to seal loopholes and standardize most of the operations like supervision. The Chinese government owns most of the enterprises in the country, and this adds complexity to how it manages its budgetary role (Bewley et al., 2018). It is because the politics in the country is likely to interfere with the operations. China is different from many countries as it is solely responsible for moving national income. It means that it distributes the income from its enterprises and other factors of production across the country. China invests its capital and allocates working capital to the enterprises it owns for renovations and allocates the rest to the state functions (Zhang & Andrew, 2016). China retains the assets from its enterprises and allocates them appropriately.

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China finances new products, production expansion and welfare allocation with debt. It is in the law that they are special purposes and retained earnings can also finance it. China now allows private entities to develop their enterprises and develop them as the country does not tax their net income (Ye et al., 2018). Foreign investors also enjoy the privilege, but they lose huge parts of their profits to taxes. The Chinese government divides the national income and allocates it in state budget accounts (Xu et al., 2019). As China distributes the national income, it aims to manage and reform its governmental budget accounting continually.

Research Questions

  • What are the main resources that fund China’s budget?
  • What are the governmental accounting reforms in China?
  • What are future considerations for governmental accounting reforms in China?

Research Objectives

  • The research aims to show the main resources that drive China’s budget
  • The study aims to reveal the governmental accounting reforms in China.
  • The research projects to give considerations for future governmental accounting reforms in China.

Statement of Problem

China’s economy is constantly growing, and it is one of the most dominant forces across the globe. A country’s financial institution is key to normal operations of its divisions and making investments. However, it faces problems such as corruption or misappropriation of funds. Therefore, the Chinese government sees the need to make governmental accounting reforms continually.

Literature Review

China gets its revenue from taxes, penalty charges and the state fund. The accounting reforms in the country include standardization and modernization to maintain efficiency and transparency in budgetary allocation and expenditure. Future considerations to improve the reforms include the introduction of specific accounting standards and stepping up legal support.

Resources Driving China’s Budget

China gets its resources from various sources, and they are important for budgetary allocations. The enterprises that the government owns submits annual receipts that are profits, including rents and contract fees. It also taxes its enterprises, and it is referred to as income tax. China has a state fund that it can access but only exclusively for developing communication and energy sectors (Tsai, 2016). China has various categories of taxes that it collects from different sectors including tariff, excise tax, value-added tax, utility tax, agricultural tax and civic construction maintenance tax (Wong, 2016). They are the main sources of income to the country and form a huge part of allocation in China’s budget. It also gets income from treasury bill and debt to international agencies and countries across the globe (Wen et al., 2018). Pollution penalty charges are one of the minor sources of income to China state.

Governmental Accounting Reforms in China

China has made huge strides in governmental accounting reforms, and they include the following. The country has made its accounting management system standardized (Howell et al., 2016). Standardization aims to make the accounting system modern, transparent, and comprehensive. After the government rolls out a preliminary budget, it undergoes a review process, and the National People’s Congress is tasked with approval (Woo, 2019. Expenditure and budgetary functions are unified for easier monitoring of all its government activities under its financial institution. Transparency works to make China’s government more responsible and make it modern as the world is constantly evolving. It is fulfilled in China as all state divisions publicly reveal their accounting information. China restrains the budget strictly, meaning that it cannot be changed without approval (Gong & Cortese, 2017). It also shows that all expenditures from all state departments are strictly monitored.

China is also working to modernize functions in the treasury accounting system. It maintains a single account that is used for all its functions like budgetary allocation. The Chinese government is slowly special elimination accounts, and it can only be retained with approval from the finance ministry. China is working to centralize its accounting disbursement department (Ji, 2019). It is to allow a unified way of payment of expenditure and collection of revenue. It aims to centralize the system up to the local level. The Chinese government is also adding dynamism to how its expenditure and revenue is monitored. It is doing this by making the systems electronic to make the collection of revenue transparent and efficient (Li et al., 2018). It means that is can monitor expenditure and revenue collection in real-time. It also enables the Chinese government to disclose information on its accounting transparently (Liu et al., 2016).

Future Considerations for Governmental Accounting Reforms in China

The Chinese government works to introduce governmental accounting reforms, and the following are suggestions on how it can improve further. The Chinese government should seek to make specific accounting standards (Dai et al., 2017). It currently uses standards that are universal to its accounts, and specific ones can be useful for regulation and easy monitoring. China should up its legal obligations on its accounting reforms (Gan, 2016). It is necessary for fast and full implementation of reforms, and China can borrow experience from foreign counties like the United States. China should decentralize functions in the Government Accounting Standards Board to ensure that it is working efficiently to implement the reforms as centralization makes it rigid (Gong & Cortese, 2017).

Significance of The Study

Governmental accounting reforms are essential to improve the financial institution of any country, and China is no exception. The study reveals the sources of China’s revenue which includes taxes, receipts from its enterprises, penalty charges and the state fund. The research reveals the accounting reforms in the country and future considerations for improvement.

Research Methodology

The research methodology in the study is meta-analysis a branch of qualitative analysis. It is the collection and review of peer-reviewed articles to reveal patterns, themes and information on the research questions. It is an efficient method as journals are easily accessible on the internet; it is cost-effective as only one researcher can conduct the process. Peer-reviewed journals are stable as information hardly changes, except for small changes that can occur once in a while.


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Dai, N. T., Tan, Z. S., Tang, G., & Xiao, J. Z. (2017). IPOs, institutional complexity, and management accounting in hybrid organisations: A field study in a state-owned enterprise in China. Management Accounting Research, 36, 2-23.

Gan, F. (2016). New achievements of government accounting reform in China—“Governmental accounting standards—Basic standards”. Modern Economy, 07(04), 450-455.

Gong, X., & Cortese, C. (2017). A socialist market economy with Chinese characteristics: The accounting annual report of China mobile. Accounting Forum, 41(3), 206-220.

Howell, A., He, C., Yang, R., & Fan, C. C. (2016). Technological relatedness and asymmetrical firm productivity gains under market reforms in China. SSRN Electronic Journal.

Ji, C. (2019). Reform and evolution of China's budget management system from 1949 to 2019. Proceedings of the 1st International Symposium on Economic Development and Management Innovation (EDMI 2019).

Li, S., Wu, H., Zhang, J., & Chand, P. (2018). Accounting reforms and conservatism in earnings: Empirical evidence from listed Chinese companies. Journal of International Accounting, Auditing and Taxation, 30, 32-44.

Liu, S., Skerratt, L., & Li, S. (2016). The impact of the 2007 reforms in China on the quality of earnings. Journal of Chinese Economic and Business Studies, 14(2), 193-209.

Tsai, P. (2016). Fiscal incentives and political budget cycles in China. International Tax and Public Finance, 23(6), 1030-1073.

Wen, L., Yang, H. (., Bu, D., Diers, L., & Wang, H. (2018). Public accounting vs private accounting, career choice of accounting students in China. Journal of Accounting in Emerging Economies, 8(1), 124-140.

Wong, C. (2016). Budget reform in China: Progress and prospects in the Xi Jinping era. OECD Journal on Budgeting, 15(3), 27-36.

Woo, W. T. (2019). China's soft budget constraint on the demand side undermines its supply-side structural reforms. China Economic Review, 57, 101111.

Xu, L., Ji, S., & Dellaportas, S. (2019). The role of institutional entrepreneurship in the development of accounting in the early 20th century in China. Business History, 1-23.

Ye, Q., Gao, J., & Zheng, W. (2018). Accounting standards, earnings transparency and audit fees: Convergence with IFRS in China. Australian Accounting Review, 28(4), 525-537.

Zhang, E., & Andrew, J. (2016). Rethinking China: Discourse, convergence and fair value accounting. Critical Perspectives on Accounting, 36, 1-21.

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