http://news.ft.com/cms/s/fde950d4-acb5-11da-8226-0000779e2340.html

China says it plans to use revenues generated by its fast-growing economy to launch a series of initiatives to overcome the "deep-seated problem" of the gaping rich-poor divide between wealthy cities and rural areas.

"All of society should energetically support rural development," said Wen Jiabao, China's premier, in his annual report to the National People's Congress, the country's parliament.

However, the initial figures provided by Mr Wen and a separate report by the finance ministry record relatively modest spending commitments for rural areas, home to about two-thirds of China's 1.3bn people.

Central government spending on farmers and rural areas will total Rmb339.7bn ($42bn, £¿5bn, ¡ê24bn) in 2006, an increase of about 14 per cent from last year, equal to the percentage increase in the military budget.

The rise in central government spending on rural initiatives is also likely to lag behind the rate of growth in central government tax revenues, which rose by 20 per cent in 2005 year-on-year.

The central government tax take has grown rapidly in recent years, reaching 17.3 per cent of gross domestic product in 2005, four points higher than in 2000 and nearly double the rate a decade ago, when China faced a fiscal crisis.

Despite the spending restraint thus far in the government's effort to revive the countryside, the political focus of Mr Wen's speech was firmly on the problems of lifting farm incomes and grain production.

Conflict between farmers and local governments, mainly over the confiscation of land, has been behind a rapid rise in violent disputes in the countryside in the last two to three years.

"Many long-standing and deep-seated conflicts have yet to be fundamentally solved and new problems have arisen that cannot be ignored," Mr Wen said.

China is also concerned that the continued loss of scarce arable land to industry will leave it dependent on grain imports, long a worry of top leaders.

"This poses a threat to the nation's food security," Mr Wen said.

China's main economic priority remains the maintenance of high-speed economic growth, with Mr Wen saying the government had set a target of an 8 per cent rise in GDP in 2006.

This lags well behind the 9.9 per cent increase in GDP last year and is lower than the economic forecasts by most local and foreign banks, which expect output to rise by more than 9 per cent again in 2006.

The government is aiming to keep inflation under 3 per cent and the urban unemployment rate under 4.6 per cent, Mr Wen said.

The Chinese premier also promised to accelerate the introduction of rural co-operative medical funds, tohelp farmers afford at least basic healthcare. Few people in the countryside have insurance and the public health system has all but collapsed