CHINA is to speed up reform of its fiscal and taxation system in a long-term move to improve its deficit budgets, according to Finance Minister Liu Zhongli. Xinhua (the New China News Agency) quoted Mr Liu as saying yesterday that although the country's financial situation was improving state finances remained unstable. He said state revenue had been rising while the excessive growth of expenditure had been brought under control to a considerable extent. Finance Ministry statistics showed total revenue had risen by 8.6 per cent by the end of August, in line with an upward trend since June. Total revenue for the first eight months of this year amounted to 254.85 billion yuan (HK$341.5 billion), an increase of 20.2 billion yuan. A slowdown in the growth rate of state income for the January-May period was reversed, with the state funds showing increases of 1.4 per cent, 5.3 per cent and 8.6 per cent, respectively, for June, July and August. By the end of August, the state had spent a total of 245.09 billion yuan since the beginning of the year, 19.6 billion yuan more than in the same period last year. But expenditure growth showed a decline - from 15.9 per cent in May to 8.7 per cent in August. Xinhua attributed the financial improvement to the repeated calls to cut expenditure and mobilise more funds for key state projects made since the launching of the austerity programme. It said unauthorised tax cuts and other preferential tax treatment had either been stopped or curbed, and the authorities had taken measures to handle previous cases of abuse. Xinhua also said the central treasury had allocated adequate funds to guarantee the purchase of grain from peasants this year. Mr Liu maintained, however, reforms of the finance and taxation system must be accelerated. The report said the State Council had approved in principle a set of comprehensive reforms. It said the finance and taxation departments would speed up the formulation and testing of the reforms to ensure that the whole package would be implemented as scheduled. Vice-Finance Minister Xiang Huaicheng told a conference in Beijing yesterday the Government would strive to seek a balanced budget in the medium and long-term by revamping its fiscal and taxation system. He said the regulatory powers of the central Government should be strengthened to ensure all economic tools and policies were given a full play in the economy. One major change among the fiscal reforms, according to Mr Xiang, was to streamline the respective revenues for the central Government and regions, which were also to set up their own taxation organs. He said the central Government was discussing a reform package with the localities and the timetable for implementation. ''[The central Government is] trying to establish a set of systematised practices which have a high degree of transparency and are in line with international rules,'' Mr Xiang said.