The Chinese government will spend 339.7 billion yuan (42 billion U.S. dollars) in agriculture, rural areas and farmers this year, which is 42.2 billion yuan, or 14.18 percent, more than last year, Chinese Premier Wen Jiabao said Sunday.

The target, along with plans to shift the government's priority in infrastructure investment to the countryside, to completely rescind agricultural tax and to increase input in rural education and medical care, signifies the drive to "build a new socialist countryside" will unravel in all fronts this year, observers say.

"We need to implement a policy of getting industry to support agriculture and cities to support the countryside, strengthen support for agriculture, rural areas and farmers, and continue making reforms in rural systems and innovations in rural institutions to bring about a rapid and significant change in the overall appearance of the countryside," Wen said in a report on the work of the government at the annual session of the national legislature.

To build the "new countryside," the Central Committee of the Communist Party of China has set objectives including "enhanced productive forces, higher living standards, civilized living style, an orderly and clean environment, and democratic administration."

China is an agricultural country traditionally, and old-style farming lasted for thousands of years in most areas. Like any other countries, China had drawn a huge sum of funds for industry development from agriculture and rural areas in the initial stage of industrialization and urbanization since 1949, resulting in yawning gap between the city and the countryside.

To narrow the gap, the government has kept increasing central fiscal expenditure on agriculture, rural areas and farmers over the last few years. In 2005, the fund from the central budget and T-bond proceeds to support agriculture, rural areas and farmers reached 297.5 billion yuan (36.7 billion dollars), which was 34.9 billion yuan more than in 2004 and over 100 billion yuan more than in 2002. The capital inputs of many localities for this purpose also reached a record high.

This year, said Wen in the report, priority will be given to developing modern agriculture and promoting steady expansion of grain production and sustained increase in farmers' incomes.

"We will further increase direct subsidies to grain producers, subsidies for growing superior grain cultivars, and subsidies for agricultural machinery and tools," Wen said.

"We need to resolutely work to reorient investment by shifting the government's priority in infrastructure investment to the countryside. This constitutes a major change," he said.

The fund will be mainly used for strengthening basic development of farmland, accelerating construction of infrastructure projects such as roads, drinking water supplies, methane facilities, power grids and communications.

This year, China will completely rescind the agricultural tax throughout the country, a tax that has been collected for 2,600 years. Wen called the move "a change of epoch-making significance."

The reform of rural taxes and fees greatly benefits farmers by eliminating 33.6 billion yuan of agricultural tax and over 70 billion yuan of various fees and charges.

Starting this year, said Wen, the government will appropriate over 103 billion yuan annually to ensure the normal operation of town and township governments and meet the needs of rural compulsory education. "This figure is comprised of more than 78 billion yuan in transfer payments from the central government budget and over 25 billion yuan from local government budgets."

To solve the difficulty of rural residents in receiving medical treatment, said the premier, the state will spend more than 20 billion yuan over the next five years on renovating hospital buildings in towns and townships and in some counties while upgrading their equipment. By 2008, a new-type rural cooperative medical care system and a rural medical assistance system should be basically in place in all rural areas.

Actually, the building of "a new socialist countryside" is not a new concept, said Chen Xiwen, director of the office of the central leading group on rural work.

The idea has been mentioned many times in the documents of the central authorities as an aim to pursue in the long run, Chen said.

"Now the concept is raised not only as the direction for long-term development but also as an urgent task we need to take immediate measures to fulfill, because China has entered a new historical period of economic and social development," he said.

During the period, the government has more resources than ever to support agriculture, rural areas and farmers and to meet the demand for coordinated development between cities and the countryside, the expert added.