The State Council last week vowed to awaken "dormant" government savings, a longstanding problem that has been characterized by one renowned economist as "an abnormality" in the national balance sheet.

Experts said that the budgeting process must be changed to resolve the problem.

The cabinet's executive meeting said the government will take appropriations that have been sitting in the nation's coffers since 2012 (or even earlier) and spend them. Special deposit accounts, which hold much of this money, will be a key target for inspection, and the cabinet has banned any new accounts of this type.

A State Council executive meeting actually discussed the same issue last July, so the fact that the issue keeps coming up highlights both its importance and the lack of progress.

Total bank deposits held by government agencies and public institutions stood at 18.3 trillion yuan ($2.99 trillion) as of Sept 30, equivalent to 30 percent of GDP, Liang Hong, chief economist at China International Capital Corp Ltd, wrote in a November report.

She said that she could not understand why local governments and public institutions have kept borrowing from banks at rates exceeding 6 percent while hoarding fiscal revenue, also in banks, at rates of less than 3 percent.

She said the negative interest rates paid on these funds are "a huge waste" and "an abnormality in China's balance sheet".

An examination of the problem has revealed deep flaws in China's public finance management, especially its budgetary process.

Local governments and their affiliated institutions have set up "special deposit accounts" to receive central government funding. These funds, standing in parallel with the "general transfer payment" system, must be spent on certain kinds of activities or products. For example, a transfer payment for "road construction" may not be used for affordable housing.

"Special transfer payments" are more discretionary when it comes to approval than "general transfer payments". That difference encourages local governments to flock to Beijing to lobby for such funds.

These funds are usually approved later in the year than general transfers, and when they arrive at the local level, it is usually already the middle of the year. Local governments usually can not spend all the money in a given budget year, which ends in December.

General budgets are approved in March and funds arrive at the local level later. But Chinese governments make one-year budgets, which means that a surplus in one year will become a problem for next year's budget.

"In theory, local governments can roll over a surplus from one budget year into the next. But usually they do not, because that means they can demand less money from the higher authorities. So their budgets grow over years, although massive amounts of money haven't been spent," said Zhang Lianqi, a partner of Ruihua Certified Public Accountants.

Zhang said that reducing "special transfer payments" and shifting to a three-year budgetary system is the key to eliminating idle funds.

The Ministry of Finance has promised to do both. Earlier this year, the ministry said that it would gradually cut "special transfer payments" and transform the one-year budgetary process into one covering three years.

The central government has promised a "more forceful" fiscal policy next year to hedge against the economic slowdown. As of Sept 30, the government held 4.1 trillion yuan of cash in the central bank. Even if half of that money was mobilized, that would be the equivalent of 13.4 percent of total fiscal expenditure this year.