The issuance of construction treasury bonds is an interim policy adopted during a period of insufficient demand and their scale should be reduced gradually as the increase in nongovernmental investment accelerates, Chinese Premier Wen Jiabao said Friday.

This year, the central government plans to issue 110 billion yuan in construction treasury bonds, 30 billion yuan less than last year, Wen said in a report on the work of the government delivered at the opening of the Second Session of the Tenth National People's Congress.

As the issuance of treasury bonds is to be reduced year by year, it will be necessary to appropriately increase the investment from the central budget for regular construction annually in order to develop a regular government investment mechanism and stabilize the sources of funding, Wen said.

To begin with, the government plans an increase of 5 billion yuan this year. The general idea is to appropriately increase investment from the central budget for regular construction each year for several years while systematically decreasing the issuance of treasury bonds, and at the same time ensuring that the size of the deficit remains at the current level.

The government will adjust the way funds from construction treasury bonds are used, concentrating them on promoting economic restructuring and ensuring all-round social development, according to the premier.

This year, funds from the sale of treasury bonds will be directed toward rural areas, social undertakings, the western region, northeast China and other old industrial bases, ecological improvement, environmental protection, and ongoing bond-financed projects. We need to manage and use treasury bonds well and ensure the quality of the projects they finance and the efficient use of investment capital.

"We must continue to do our fiscal and taxation work well by working hard to increase revenue and reduce expenditure, collecting taxes in strict accordance with the law and guaranteeing funding for key items," the premier said.

The government should make full use of the role of monetary policy, appropriately control the size of credit and optimize the credit structure to support economic growth while fending off inflation and financial risks, he said, pledging to work to basically balance international payments and keep the exchange rate for the Renminbi basically stable at a proper and balanced level.

(Xinhua News Agency March 5, 2004)