China will adjust the way it distributes funds from the fiscal budget this year to help support people's livelihoods and a more balanced path to development.

The country will also establish a 50-billion yuan (US$6.45 billion) central budget stabilization fund.

The Ministry of Finance (MOF) promised these changes in a report it submitted to the Fifth Session of the 10th National People's Congress, which opened yesterday.

The "rainy-day" fund, which could be used to balance the budget during emergencies or in times of reduced tax revenues, is a necessity, Liu Shangxi, deputy director of the Research Institute of Fiscal Science under the MOF, told China Daily.

"It will maintain the stability of the country's fiscal policy," he said.

The government has forecast fiscal revenue of 2.44 trillion yuan (US$315 billion) this year, or 15 percent more than last year's real level.

It has budgeted expenditures of 2.69 trillion yuan (US$346.7 billion) this year, an increase of 14.4 percent over what was spent last year.

As a result, the central government expects to run a fiscal deficit of about 245 billion yuan (US$31.6 billion), or 1.1 percent of gross domestic product (GDP), the report said. That is 50 billion yuan (US$6.45 billion), or 17 percent, less than the amount budgeted last year.

Last year's budget called for a deficit-to-GDP ratio of 1.5 percent. It was actually 1.3 percent.

The implementation of programs to develop the countryside will be a particular focus of the fiscal budget, according to the fiscal report.

The authorities will earmark 391.7 billion yuan (US$50.54 billion) for expenditures related to rural areas, representing a year-on-year increase of 15.3 percent. Part of those funds will be used to establish a system to guarantee a nationwide minimum standard of living for farmers.

Spending on education and medical services will increase by a large margin, the report said.

The central fiscal budget calls for 85.9 billion yuan (US$11 billion) to be spent on education this year, a 41.7 percent increase on last year's spending.

The report said the authorities would set up system to provide financial support to poor students to help them complete their nine-year schooling during the 2006-10 period.

The central government will also set aside 31.3 billion yuan (US$4 billion) for medical and health costs, representing an 86.8 percent jump over 2006, according to the report.

Liu said the sharp increase in spending on projects aimed at improving people's livelihoods reflected the pragmatic approach policy-makers are taking to addressing issues the public cares about.

For example, part of the health funds will be used to tackle infectious diseases and expand the network of rural co-operative medical services so that it covers 80 percent of the country's counties.

By the end of last year the pilot program to provide rural cooperative medical services had spread to 50.7 percent of all the counties.

In a separate report on economic and social development, the National Development and Reform Commission said that while the country will maintain its stable and fast economic growth, it will also increase input to accelerate the development of its rural economy and improve social services.

"A stable rural investment mechanism will be set up," the report said.

The nation will push coordinated regional development and continue with its urbanization drive, according to the report.

It also said the government would continue its pro-active employment policy and improve its income distribution and social security system.

The report was submitted to the NPC session for review yesterday.

(China Daily March 6, 2007)