China will continue to issue a certain amount of long-term treasury bonds as it sticks to its pro-active fiscal policy next year, sources close to the government say.

Zhang Liqun, a senior researcher with the Development Research Center under the State Council, said maintaining the continuity and stability of the pro-active fiscal policy is crucial for China's economic development.

But the amount of treasury bonds to be issued in 2004 will be less than this year's number, he said, declining to give further details.

Experts estimate the country will issue 110 billion to 120 billion yuan (US$13.3-14.5 billion) in long-term treasury bonds in 2004.

Meanwhile, the government will speed up the pace of shifting the focus of its pro-active fiscal policy from stimulating economic growth to sustainable development.

Zhang said it means that fixed asset investment backed by treasury bond issuances will be reduced. The proportion of treasury bonds in total investment has already decreased substantially as investment from private companies and foreign-funded companies has been quite active in recent years.

"The market forces have begun to play a leading role in the country's economic development," Zhang said.

Zhou Jingtong, a senior economist with the State Information Center, said it is still necessary for the government to issue a certain amount of treasury bonds.

"The government needs a lot of money to solve prominent economic issues such as environmental protection, its western development strategy, revitalization of the old industrial bases in Northeast China and boosting the growth of farmers' income," he said.

It means the pro-active fiscal policy will pay more attention to solving problems that cannot be resolved by the market, Zhou said.

Zhang said in the coming two or three years, the fiscal policy will give key emphasis on solving the problems of laid-off workers, rural issues, pension issues and unequal income distribution.

The government will also increase financial support for rural areas and farmers.

"Agriculture is the base of China's economic development," Zhang said.

But Zhang Peisen, a senior researcher with the Taxation Research Institute under the State Administration of Taxation, said the country would not be able to implement the policy over the long-term.

Extra heavy government debts, which could possibly be brought about by the fiscal policy, will cast a shadow over the country's future economic development, he said.

China is still suffering from weak domestic demand despite implementing the policy in about 1998.

Zhang Peisen said the failure to lift domestic demand is mainly due to China's economic structure, which cannot be solely remedied by the fiscal policy.

A final solution to the problem of sluggish domestic demand rests with comprehensive economic reform, he said.

(China Daily November 24, 2003)