China has allocated more funds for agricultural subsidies, education and health care this year to combat inflation and steer the economy away from overheating, Finance Minister Xie Xuren said Wednesday.

The spending from central government on agricultural subsidies is expected to reach 431.8 billion yuan (US$58.3 billion) this year, a rise of 22.8 percent from a year earlier.

The expenditure on education will probably grow 76.3 percent to 106.8 billion yuan while health care may observe the fastest growth in spending, a 276.8-percent increase, to grow to 63.1 billion yuan, said Xie.

He expects China's fiscal revenue will gain 31 percent to 5.1 trillion yuan this year.

Through November, China's fiscal income rose 33.5 percent to 4.82 trillion yuan, already up 9.3 percent from the budget for the entire year. The accumulated spending accelerated 25.2 percent to 3.71 trillion yuan, 79.7 percent of the budget.

China reported a central government deficit of 295 billion yuan last year, which accounted for 1.3 percent of its gross domestic product. It expected to make it drop to 1.1 percent of the GDP this year, according to earlier reports.

"Next year, we will cut the fiscal deficit and stop issuing long term construction bonds and we will spend more to improve people's livelihood," said Xie.

"China will apply a prudent fiscal policy next year to stabilize market prices and contain inflation."

More funds are expected to be offered as direct compensation to farmers next year and to help with the production of grain, oil and meat to safeguard a steady supply of necessities.

In November, China's consumer prices soared to an 11-year high of 6.9 percent, with rural areas harder hit than urban areas. The higher than expected increase pushed the main inflation gauge to 4.6 percent for the first eleven months, departing further from the central bank's earlier target of three percent.

But the current consumer price rises are only structural rather than across the board, said Yao Jingyuan, chief economist with the National Bureau of Statistics.

"Less developed interior areas suffer more, with China's northwestern Qinghai Province worst affected by the price hikes, followed by the southwestern Guizhou Province," said Yao. "Big cities, like Beijing, Shanghai and Guangzhou, are less influenced."

(Shanghai Daily December 20, 2007)