The central government is planning a massive increase in spending on rural development this year, with a 30 percent year-on-year rise to a record high of 562.5 billion yuan ($79 billion).

The amount set aside for the country's 700 million farmers accounts for about 16 percent of the government's total spending of almost 3.5 trillion yuan this year, Minister of Finance Xie Xuren said of the draft budget yesterday, on the sidelines of the ongoing annual session of the National People's Congress (NPC).

The figure, still to be approved by the national legislature, is double the central government's input for similar efforts in 2005 and surpasses the total expenditure on rural development between 1998 and 2002 when the country focused its energies on urban development.

The funds will be used to boost agricultural productivity, increase farmers' incomes and improve their living conditions, Xie said.

"The central government is determined to continuously double its efforts in rural development," he said.

Farmers will get 133.5 billion yuan in direct subsidies, while 304.4 billion yuan will be used to improve production capabilities and 124.5 billion yuan will be spent on education, culture and health undertakings.

The proposed bigger budget came after the authorities decided to continuously implement a prudent fiscal policy to promote structural adjustment and balanced development, Xie said.

The central government's budget deficit this year will be set at 180 billion yuan, 65 billion yuan less than last year, and the government plans to issue 30 billion yuan of treasury bonds for investment, 20 billion yuan less than last year.

Ma Kai, minister in charge of the National Development and Reform Commission, said the government has come up with measures for rural regions to deal with inflation pressure this year, which has mainly resulted from rising food prices and production costs.

"So we should go back to basics, to take measures to further increase agricultural yield and supply, to offset grain price hikes globally," Ma said.

The measures and increased expenditure can help those in the countryside benefit from the soaring economic growth of the past decades, Ma said.

"We have a big market and great consumption potential in rural regions," Ma said, adding that China's economy would be driven up if the consumption power of those in the rural areas is fully tapped.

A new rural cooperative medical insurance will also be implemented in all rural areas, Xie said.

In two years, the country will raise the annual premium for personal accounts from 50 to 100 yuan for each person, with central and local government contributions raised from 40 to 80 yuan for each individual.

Each farmer will pay 20 yuan instead of the 10 yuan currently.