Chinese Vice Premier Li Keqiang urged local authorities on Sunday to cut unnecessary spending and beef up fiscal revenue to support the economic recovery amid the grim fiscal conditions.

Although the economy has shown signs of stabilizing, many difficulties and challenges remain, Li told local financial bureau heads at a conference in Beijing on Sunday.

He said the government will firmly stick to the proactive fiscal policy and the relatively easy monetary policy, and implement the stimulus package at full swing.

He urged local authorities to cut administrative costs, and spend more money on improving people's lives. Tax collection should also be stepped up to adequately fund the economic expansion.

"It is a tough job to make the ends meet this year," he said.

China set a record high fiscal deficit budget of 950 billion yuan (US$139.09 billion) for this year. Although it is still in safe range as it was less than 3 percent of China's gross domestic product (GDP), experts worried the government might come under pressure to sustain a continuous deficit expansion in the coming two to three years.

According to the data released by the Ministry of Finance, China's fiscal revenue fell 2.4 percent in the first six months from a year ago to about 3.4 trillion yuan, while its fiscal expenditure rose 26.3 percent to 2.89 trillion yuan.

Li said the fiscal policy should facilitate the industry restructuring and spur consumer spending. Obsolete capacity should be eliminated, and the subsidies for farmers on home appliance purchase, as well as environmental-friendly products will continue.

China has been struggling out of an export-led growth model to a consumption-driven pattern to offset negative impact of the sluggish external demand.

Boosted by the government's 4-trillion yuan stimulus package, China's GDP grew 7.9 percent in the second quarter after sinking to 6.1 percent in the first three months.

(Xinhua News Agency July 27, 2009)