CHINA'S cash-strapped banks may soon get a injection of capital, thanks to fiscal funding not a loosening of government policy.

More than 1 trillion yuan (US$158.2 billion) of treasury deposits are expected to be allocated by the Ministry of Finance to government departments in November and December, according to a report by China International Capital Co, the country's top investment bank.

China allocated 700 billion yuan to cover a deficit in the 2011 Budget adopted in March this year.

The ministry data showed fiscal revenues at 1.2 trillion yuan between January and September. That implies fiscal expenditure will top 1.9 trillion yuan in the fourth quarter of this year.

As the massive fiscal funding was made near the end of the year in the past years, CICC predicts the country's banks will beef up their capital strength by 1.2 trillion yuan.

Liquidity conditions for Chinese banks have started to improve since the beginning of November after the People's Bank of China, the central bank, stopped draining liquidity from the banking sector through its open market operations last week.

Last week, the PBOC released 96 billion yuan of cash into the money market in its first liquidity injection through open-market operations in four weeks.

Expectations of a partial moderation of the country's credit-tightening measures have heightened in recent weeks after Premier Wen Jiabao said on October 25 that the government will ensure that its macro-control policies will be fine-tuned "when the time is right."