China reported a fiscal surplus of 361.6 billion yuan (US$44.6 billion) during the first 11 months of this year.

Addressing an annual finance conference in Beijing yesterday, Finance Minister Jin Renqing said the country's fiscal revenue, from tax and other fees, reached 2.89 trillion yuan (US$356.9 billion) during the January-November period.

That is an increase of 18.5 percent compared with the same period a year ago.

Expenditure stood at 2.53 trillion yuan (US$312.3 billion) during the same period, up 17.3 percent year-on-year.

Jin predicted the country's fiscal revenue would hit 3 trillion yuan (US$369.9 billion yuan) for the whole of this year.

"The government will continue to carry out a prudent fiscal policy to maintain the continuity and stability of its macro economic policies," he said, without elaborating.

Peng Longyun, a senior economist with the Asian Development Bank in China, said the government would continue to cut its deficit and issue less treasury bonds next year.

This year's budgeted fiscal deficit was 300 billion yuan (US$37 billion), accounting for about 2 per cent of the total gross domestic product.

The government reduced its treasury bond issuance this year by 30 billion yuan (US$3.7 billion) compared with last year.

"The government will continue to reduce the absolute amount of deficit and its ratio to the gross domestic product next year," Peng told China Daily.

According to Jin, the country would adjust and optimize the structure of government spending next year.

Priority will be given to rural construction, science, education, medical care, social security, energy saving, ecological construction, environmental protection and western development.

The government will also adjust and regulate income distribution to propel growth of consumer spending.

Jin emphasized that the government would cancel the agricultural tax across the country and increase direct subsidies for grain production.

It will also increase financial support for rural medical care, education, scientific development, and construction of environmental and culture facilities in rural areas.

"The government will give key emphasis to re-employment and the improvement of the social security system," he said.

He added that the country would deepen fiscal and tax reforms to improve the socialist market economic mechanism.

The government will try to spread value-added tax reform, which allows companies to claim tax deductions when buying new machinery equipment.

It will also push forward reforms with the consumption tax, resources tax, enterprise income tax and real estate tax.

(China Daily December 20, 2005)