China's Vice Minister of Finance, Lou Jiwei, has reaffirmed China will maintain the proactive fiscal policy, state media reported.

Lou said that China will continue to funnel state funds into massive infrastructure projects and to use government investment to address the gap in rural/urban development, the official Xinhua News Agency reported late Friday.

However Lou indicated that the government will try to trim the ballooning growth in state fixed-asset investment that rose 30.5% year-on-year to 3.4351 trillion yuan (US$1=CNY8.28) in the first nine months of 2003.

"The government has decided to keep the continuity of the proactive fiscal policy while properly adjusting the allocation structure and reducing the size of the government investment in evidence of the gradual and rapid growth of private investment," the report said, citing Lou.

Lou's comments follow a similar defense of China's proactive fiscal policy by Vice Premier Wu Yi on Thursday. That defense came in the wake of recent calls by Chinese economists that the government phase out the policy to head off a dramatic escalation in state debt levels.

The proactive fiscal policy is how China describes its state spending on fixed-asset investment, spending that has pushed the government's annual deficit from less than 1% of gross domestic product to more than 3% since 1997.

China's leadership has mainly directed those funds to infrastructure projects, which have provided much-needed jobs for laid-off workers as China's shift from a socialist planned economy results in widespread closures of ailing state- sector firms.

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