The Chinese government on Thursday announced an increase of 25.25 billion yuan (US$3.6 billion) to this year's rural spending budget in an effort to boost agricultural production and cool an inflation surge blamed on food shortages.

The extra funds would be used mainly as direct subsidies to farmers, said a statement from the State Council, China's Cabinet.

The original budget was 562.5 billion yuan for this year, 130.7 billion yuan more than that in 2007, Premier Wen Jiabao said in a national videophone meeting with the presence of the country's four newly-appointed vice premiers.

The move was meant to ensure adequate market supply, curb inflation, tackle changes in international farm produce markets and safeguard China's grain security, Wen said.

He ordered officials to be "fully aware of the uttermost importance of further reinforcing agricultural and grain production."

"China should increase policy support (for agriculture) with clearer, straighter and stronger signals to mobilize and protect the initiative of farmers to plant crops," he said.

The Cabinet agreed 15.6 billion yuan of the extra funding would be used to subsidize farmers' purchases of production materials, including diesel oil, fertilizer and pesticide. The new sum lifted such subsidies to 63.8 billion yuan this year.

Five billion yuan was added to seed purchase subsidies, bringing the total to 12.07 billion yuan, which would cover 29.5 million hectares of rice, 13.4 million hectares of wheat and 13.4 million hectares of corn.

The government's purchasing prices of grain would be raised by between 4.3 percent and 10 percent.

More money would also be channeled into flood prevention, drought relief, agricultural infrastructure construction and animal disease control in central and western areas.

The Cabinet said vehicles carrying fresh farm produce should continue to be exempted from road tolls. It also vowed to closely monitor farm produce markets and encourage pork production, and ordered an increase in rural loans.

The announcement added to a string of efforts to end shortages of pork, China's staple meat, and other basic commodities that pushed the inflation rate to a near 12-year high of 8.7 percent in February.

Pork production fell dramatically last summer on breeders' dampened enthusiasm due to rising feed costs in addition to a massive pig cull after the outbreak of blue-ear disease in some regions.

The unusually harsh winter weather also dealt a serious blow to vegetable and rapeseed crops in many areas and killed many pigs and chickens.

(Xinhua News Agency March 28, 2008)