The State Council, China's Cabinet, released a regulation on government investment on Sunday.

The first of its kind, it aims to deepen reform of the government's investment and financing mechanism and enhance law-based administration. It defines the scope of government investment to ensure the investment focuses on key areas and goes where it is targeted.

According to the regulation, government investment should be channeled to public sectors where resources cannot be effectively allocated by the market, and mainly target nonoperational projects.

It says that a mechanism of regular assessment and adjustments will be established to optimize the scope, scale and structure of government investment.

The regulation also clarifies the major principles and basic requirements for government investment, stressing the necessity of making rational investment decisions, having standardized management, being results-oriented, open and transparent, as well as being in accordance with the requirements of economic and social development and public finance.

The regulation stipulates that the government and relevant departments are prohibited from raising investment funds through illegal borrowing, and should treat all investors equally when allocating government investment funds.

It also regulates the decision-making procedures for government investment, standardizes the approval mechanism for government investment and consolidates the binding effect of investment estimates. For major projects, procedures such as evaluations by third-party intermediary service agencies, public participation, expert assessment and risk evaluations must be performed.

The regulation also requires making annual plans for government investment and further tightening supervision both during and after the implementation of relevant projects.

The regulation will come into effect on July 1.