Accounting for China’s government liabilities: after much progress, great tasks remain

ABSTRACT

This analysis of Chinese government accounting standards focuses on liabilities. The merger of budget accounting and financial accounting in a single information system is a major achievement of the current reform. The current liability standards generally do not push for the early recognition and disclosure of provisions and contingent liabilities. They require deepening and effective implementation to facilitate fiscal risk analysis and management. This paper endorses the integration of government accounting with the fiscal budget and government finance statistics.

IMPACT

While accountants cannot decide how much government borrowing is too much, this paper endorses some international performance benchmarks for holding Chinese government accountants responsible for supplying reliable information. This paper aims to increase the appreciation of the outside world about the complexity of Chinese public finances and the efforts made by the Chinese government to improve the quality of financial information. The paper explains why technocrats charged with designing government accounting standards and systems need to keep pace with changing financial practices and to co-ordinate with their counterparts in domestic and international budgeting and statistical organizations to ensure consistency of data sources.

KEYWORDS:

• Chinese government accounting
• Chinese government financial reporting
• contingent liabilities
• fiscal risk
• Government Finance Statistics (GFS)
• government liabilities

Acknowledgement

We appreciated the comments and suggestions by three anonymous reviewers, Ehtisham Ahmad (London School of Economics), Andreas Bergmann (Zurich University of Applied Sciences), and in China: Chen Suihong (China Academy of Fiscal Sciences), Niu Meili (Sun Yat-sen University), Zhang Qi and Tan Yanyan (Zhongnan University of Economics and Law). We also benefitted from collaboration with Yang Quanshe (Capital University of Economics and Business). We are solely responsible for remaining shortcomings.

Disclosure statement

The authors have no actual or potential conflict of interest in the matters discussed in this paper.