BEIJING, Jan 7 (Reuters) - China plans to stamp out wasteful medical projects and establish teams of health inspectors to raise standards of hospitals and doctors, Health Minister Gao Qiang said on Saturday.

Gao told a meeting of health officials to "strictly control the construction scale and expansion rate of major public hospitals, and restrict hospitals from unapproved use of bank loans and investment to buy major medical equipment", according to the semi-official China News Agency.

In recent years, medical bills have become a sore point for many Chinese, who rely on personal savings or rudimentary medical insurance to pay charges.

Many hospitals have looked to boost revenue by using expensive equipment and medicine even when unnecessary, reports suggest.

Last month, the case of Weng Wenhui sparked outrage in the China's press after he was treated for 67 days at a hospital in the north-eastern city of Harbin before dying and leaving his family with a 5.5 million yuan ($680,000) bill.

The health ministry promised to "sternly punish" hospital officials amid claims they altered medical records and charged for unnecessary tests and treatments.

From 1978 to 2002, Chinese spending on health care grew from an annual 11 yuan to 442 yuan per head, according to Health Ministry statistics.

Over the same period, the government's share of spending fell from 32 percent to 15 percent.

A U.N. report on China's next five-year development plan said China's healthcare system "has failed to meet health needs, and government attention to basic health has proven insufficient", it added.

Gao promised to begin redressing the imbalances.

"China's healthcare ... can't blindly compete with developed countries, obsessively pursuing cutting-edge technology and luxurious facilities," he told the Beijing meeting.

The health ministry will add 200 inspectors and will expand medical services in the countryside, Gao said.

Gao also ordered hospitals to treat patients with severe illnesses or in economic hardship without first demanding payment. "We just won't allow people to die while others watch," he said.