Sources with the Ministry of Finance (MoF) have confirmed the country will continue with the prudent fiscal policies it has taken since 2005.
 
Ministry spokesman, Zhang Tong, told Xinhua before the opening of an MoF conference that in contrast to austere fiscal policies a more moderate approach was required. Such moves were taken when total supply and demand were equal but there were some structural imbalances.

China saw a threat from rising inflation, excessive investment in some industries and 'bottlenecks' in coal, electricity, petroleum and transportation in 2003. Since 2005 the government had taken prudent fiscal policies that are different from the pro-active policies it took since 1998 to avoid economy overheating, said Zhang Tong.

These fiscal policies focus on controlling deficits, improving economic structure, promoting reform, increasing revenue and slowing expenditure, he said.

The Chinese government had started to change the direction of fiscal policies by adjusting the scale of long-term treasury bonds for development and optimizing use of them in investment projects.

According to MoF statistics the deficit in the central budget fell by 19.23 billion yuan (US$2.47 billion) last year. This is a year-on-year decline of 0.4 percent.

Zhang said China had been expanding its fiscal expenditure in agriculture, education, public health and social security in recent years.

The MoF distributed 14.2 billion yuan in direct subsidies to over 600 million grain planters this year.

As part of the prudent fiscal policies the MoF has endeavored to minimize the income gap by improving income distribution policies and supporting the construction of an energy-efficient and environmentally friendly society by taxation adjustment, said Zhang.

China's GDP grew by 10.7 percent in the first three quarters. During that period 9.32 million people in urban areas found employment. This accounts for 104 percent of the annual target.

By the end of September 182.4 million people had basic old-age insurance, 150 million medical insurance, 110 million unemployment insurance, 94.47 million work-related injury insurance and 22.3 million urban poor were in receipt of subsistence allowances, according to MoF statistics.

(Xinhua News Agency December 18, 2006)