Minister of Finance Jin Renqing yesterday cautioned that fiscal performance faces a tough challenge in the latter half of this year as the impact of SARS on the nation's finance bites.

But despite the bleak, short-term financial outlook, Jin pledged more investment in public health and the building of a contingency handling mechanism.

"State coffers are likely to see less income and more expenditure in the second half of this year," he said.

"We should have a comprehensive evaluation of possible challenges and take more active and concrete action to face them," he added.

Jin made the remarks whilst delivering a report on the final accounts for central revenue and expenditure for last year to the ongoing session of the Standing Committee of the National People's Congress, China's top legislative body.

National revenue last year was 1.89 trillion yuan (US$228.6 billion), and State expenditure hit 2.2 trillion yuan (US$266.7 billion), Jin said, with a deficit of 314.951 billion yuan (US$38 billion).

Jin reported to senior legislators that the January-May revenue reached 903.998 billion yuan (US$109 billion), an increase of 28 per cent on the same period last year. State expenditure totalled 731.56 billion yuan (US$88.46 billion) during the same period.

Jin said national financial revenue growth has seen an effective drop due to the outbreak of SARS.

The country's financial revenue in April and May increased 15.5 and 20.7 per cent respectively compared to the same period last year.

Year-on-year financial revenue growth in the first three months averaged 36.7 per cent.

Jin pledged to maintain central government's support for public health and the establishment of a contingency handling mechanism, the urgency of which has been highlighted by the nation's fight against the flu-like virus.

Central finance had spent 1.3 billion yuan (US$157 million), and local finance had allocated over 10 billion yuan (US$1.2 billion), to control and prevent SARS by last Wednesday, Jin said.

Soon after the outbreak of the disease, the central government promised free treatment to farmers and poor urban residents who contracted SARS.

"That was a concrete support to prevent SARS from spreading to rural areas," he continued.

At the same time, Jin said the central government had worked out a series of policies to support the medical staff who worked on the anti-SARS front.

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