“Budge Reform: the Modernization of State Governance Capacity and the Route Choice in the Context of Rule of Law”Journal of Beijing Administrative College, 2016 (5), 47-56.

After three decades of reform and opening, China has basically completed the first two steps of the Three-Step Development Strategy laid down in the Third Plenary Session of the 11^th Central Committee of the CPC, which means China has solved the problem of food and clothing and generally starts to strive for a relatively comfortable life. The development strategy for the next three decade is to achievea comprehensive well-off society and go toward common prosperity. The center of state governance for the past three decades lied in the construction and perfect of market mechanism.Aseries of reforms were made on management institution, system, rules and approaches to realize the transfer from nationalization to marketization of social economic and public affairs management. In the contrast, the center for the next three decades will move toward society construction. The reforms of state governance structure will transfer from administrative efficiency and economic growth toward a decisive position of resources allocation through market mechanism, the changes of economic development approaches, and the country-market relationship, country-society relationship and relevant matters.

China has now entered a deep water area, with a lot of difficulties to overcome. State construction and society governance require both democratic and legal governance environment as well asfull-round governance capacity to address various complicated issues.The third and fourth Plenary Sessions of the 18^th Central Committee of the CPC are of historical significance. In these two sessions, the objective situations were accurately appraised. New theoretical judgment and guidance was made on comprehensively deepening the reform and forming asystem of laws to build a country under “the socialist rule of law”. From the perspective of governance capacity, the modernization requires the governance rules to transfer from the double-track system to the single-track system. Traditionally, the file governanceroute that centered on major government reports goes parallel with law governance route that centered on the constitution and laws. Now, the only route is the constitution centered law governance. Through the improvement of socialist system of laws, the relationships between the stakeholders are coordinated and the public order is maintained. It is an important signal of governance modernization that a country rule by law turns into a country rule of law.

To realize such transformation of governance path needs strong guarantees. In the Third Plenary Session, it has been specified that finance is the pillar and foundation of state governance, which means that the building of modern financial system has been involved in the governance system. The core of financial system is budget, through which the function of finance can be performed. The basic requirement of the country rule of law is modern budget system. Budget is anirreplaceable governance instrument. The role of budget in state governance has been frequently discussed home and abroad. But today, the focus should be put on its role in improving governance capacity and pushing forward rule of law. The capacity of budget can be decisive to the capacity of the country, so the legalization of public budget (specifically, the implementation of the Budget Law) is a breakthrough to realize rule of law and push forward governance modernization.

This paper focuses on budget, governance modernization and rule of law. It discusses the relationship between budget and governance capacity and uses syllogism to explain the role of budget legalization in governance modernization.Based on theinternational experiences in budget reforms, it makes a brief analysis on the Chinese budget system and its reforms. The budget legalization has three positive effects. First, it enhances the quality of government budget and promotes the institutionalization of government administration. Second, it helps to establish a low-cost government through lowering administrative cost and urging the improvement of administrative effectiveness. Third, it reduces administrative corruptionand enriches the governance mechanism. The American experiences testified that “an invisible government” was destined to be “an irresponsible government”. The purpose of budget reforms is to make the government visible. If the national financial capital is not transparent and the budget does not serve as the bridge between the government and the citizens, the governance modernization will not be achieved, and the issues of the huge waste of public funds and massive corruptions cannot be addressed fundamentally. The analysis on budget issues and their cause can reveal the existing systematic loopholes, mechanical obstacles and institutional defects.

In order to realize the legalization of budget and further enhance the governance modernization, the following difficulties are in need of urgent solutions. First, establish budget decentralization regulations to balance the power of financial system. Second, expand the investigation right of the People’s Congress, increase the citizen participation, and creating a transparent public finance system to ensure the democracy and openness of government budget. Third, accelerate the building of budget regulations tonormalize the intergovernmental financial relationship and other financial relationships,standardize the transfer payment system and divide the property rights and responsibilities between the governments in a rational manner. Fourth, strictly follow the Budget Law.Carry forward its spirit, revise the regulations on Budget Law to make it connect with other rules and regulations including Law of the People’s Bank of China and the Treasury Rules, and implement the Budget Law in an all-round way.

All in all, the legalization of budget is the breakthrough to achieve rule of law and construct a country rule of law. It is also a best choice to push forward governance modernization and comprehensively deepen the reforms. The attention on budget will increase the awareness on rule of law and foster the faith in rule of law. Effectively implement the Budget Law and manage finance by law is the way to govern the country and realize the Chinese Dream.