BEIJING -- Coupons issued by local governments to low-income families over the Spring Festival holidays in China are playing positive role in stimulating domestic demand, China's Ministry of Commerce (MOC) said here on Monday.

Vice minister Jiang Zengwei said the action is "practical" and "effective" in the current situation, adding that a comprehensive social security system will also boost consumption.

Municipal governments of southern Hangzhou and southwestern Chengdu issued coupons valued at 1000 million yuan (US$146.3 million) and 37.91 million yuan respectively for local registered low-income families before Chinese Lunar New Year holiday, following earlier government calls to extend subsidies for the needy. More cities are expected to follow the lead.

An estimated total of 380,000 residents in Chengdu were to receive  coupons. Hangzhou reported a higher figure of about 580,000 that included the region's 260,000 primary school and middle school students.

Both cities reported a surge of customers in local markets during the new year holiday. Specific statistics are yet to be collected.

While specifying that coupon issuance is a temporary measure to spur domestic consumption, Jiang Zengwei with MOC stressed the importance of increasing earnings for the country's low-income families.

Long-term solutions to stimulate consumer confidence are tied to the establishment of a sound social security system, according to Jiang.

"We have been preparing for reforms in China's health care system and education scheme. Once implemented, both will help enhance consumption," Jiang said.

On January 21, China's State Council, or Cabinet, passed a long-waited medical reform plan that promises to spend 850 billion yuan by 2011 to provide universal medical service to the country's population of 1.3 billion.