China recorded a fiscal surplus of 283.7 billion yuan (US$34.2 billion) during the first 11 months of this year, Finance Minister Jin Renqing said on Tuesday at the annual national finance conference in Beijing.

Fiscal revenue stood at 2.44 trillion yuan (US$294.3 billion), an increase of 23.5 percent compared with the same period a year ago, whilst expenditure of 2.16 trillion yuan (US$260.1 billion) represented an increase of 14.1 percent.

The country's fiscal revenue is likely to reach 2.6 trillion yuan (US$313 billion) for the whole of this year, said Jin.

In order to improve macro control, and to promote fast and solid economic development, the government has decided to practice a 'prudent fiscal policy' next year.

"The government will reduce the national debt to prevent both inflation and deflation," the minister said.

He said earlier in an article published in People's Daily newspaper that the country will maintain the national debt at about 300 billion yuan (US$36.1 billion) in the near term.

"The national debt/GDP ratio will drop to about 2 percent next year," he said.

"A prudent fiscal policy will play a more active role in removing unhealthy and unstable factors of economic development and stabilizing the performance of the macro economy," Jin added.

"It will also play an important and active role in consolidating the base for long-term social and economic development and increasing its sustainability," he said.

Preferential fiscal and tax policies will continue to be offered for the development of western areas and renovation of the old industrial belt of northeast China.

The government will reduce the issuance of special bonds for construction and will back rural infrastructure projects and large water projects, he said. It will also support grain production and improvement of rural production and living conditions.

Development in the old revolutionary base areas, border areas, poor areas and areas where ethnic minority groups live will be encouraged, and support given to key projects such as construction of the Qinghai-Tibet Railway and the west-to-east gas project.

While maintaining stable growth in fiscal revenue, the government will actively push forward structural tax system reform, Jin added.

It will proceed with value-added tax reform, which started on a trial basis in northeast provinces from July 1 this year.

The reform, which allows companies in the provinces of Jilin, Liaoning and Heilongjiang to claim tax deductions when buying new machinery equipment, will be expanded to some other regions.

(China Daily December 22, 2004)