Vice Minister of Finance, Zhu Zhigang said on Tuesday that China's shift over the past couple of years from a proactive fiscal policy to one that is more prudent has proven successful.

China began to pursue a proactive or an expansionary fiscal policy in 1998 in a bid to address the impact of the 1997 Asian financial crisis on the domestic economy. It meant increased government spending to stimulate economic growth. A prudent fiscal policy is designed to avoid dramatic government intervention in the economy.

Addressing a national meeting of officials from the central and provincial finance departments, the vice minister said the central government slashed its treasury bond-funded investment in infrastructure projects to 60 billion yuan (7.5 billion US dollars) in 2006 from 150 billion yuan in 1998.

The cut in government spending on infrastructure projects was made in order to balance the country's economic and social development after its economy got back on track and some sectors started to overheat.

Reduced government spending on industrial sectors has meant more spending on agriculture, education and social security, the vice-minister said.

China's overheated sectors such as iron and steel, aluminium and cement have resulted in power shortages, rising prices of raw materials and overcapacity.