Although under Mao China was much poorer in terms of GDP on the whole the distribution of wealth was more egalitarian. With the transition to a market economy and privatisation of state assets a class of quite wealthy Chinese is even more apparent and goods are now rationed mostly on the basis of wealth rather than by a national plan under the previous command economy. While many in urban areas can buy goods that were not available generally before many are also left behind and if anything worse off than under the previous command economy. Many too find that land is being confiscated for development with no benefit to the peasants.
By spending money to help and develop the countryside China will stimulate domestic demand and make itself less dependent upon exports. Also, the Chinese Communist Party may garner more support for itself and maintain its hold on power without the need for much repression. This is from aljazeera.
China vows to tackle social divide
China's premier has opened the country's annual parliamentary session pledging to tackle a growing social divide and make "improving people's well-being" the focus of the country's development.
Speaking at the start of the National People's Congress (NPC) in Beijing, Wen Jiabao said China faced "major problems" that "urgently require solutions".
"We must always remember that developing the economy is inseparable from improving people's well-being and safeguarding social fairness and justice," he said.
"Everything we do, we do to ensure that the people live a happier life with more dignity and to make our society fairer and more harmonious."
The Chinese premier's annual address to the NPC is Beijing's equivalent of the US president's state of the union speech, in which the government outlines its priorities in the year ahead.
"We will not only make the pie of social wealth bigger by developing the economy, but also distribute it well on the basis of a rational income distribution system"
Although usually regarded as China's parliament, the annual meeting of the NPC has no real legislative power but usually meets to rubber-stamp the decisions of the Communist Party elite.
Wen devoted much of Friday's speech to the economy, with emphasis on trying to push consumer spending as part of China's attempts to reduce its dependence on exports.
He again set a target of eight per cent economic growth this year and called 2010 a "crucial year in the battle against the global slowdown".
Eight percent growth has become the figure China's leaders feel is the minimum necessary to avoid widescale joblessness and social unrest in the world's most populous country.
But Beijing also plans to increase spending on social programmes and direct more development money to rural areas as Wen said urgent solutions were needed to combat "major problems" in the areas of healthcare, education, housing, income distribution and public administration.
Key points of Wen's speech
China faces "crucial year" in battle against global downturn
Target of 8 per cent growth for 2010
Vow to bridge gap between rich and poor, boosting social spending in rural areas by 12.8 per cent
Tighten up credit and keep tight rein on inflation at around 3 per cent
Cap urban unemployment at 4.6 per cent
Pledged to keep value of currency, the Yuan, "basically stable"
Addressing the millions of mainly rural poor who had been left behind by China's economic boom he said the government would step up efforts to broaden the social safety net.
"We will not only make the pie of social wealth bigger by developing the economy, but also distribute it well on the basis of a rational income distribution system," Wen said.
According to the latest official figures, China's rural-urban wealth gap was the widest last year since the launch of economic reforms three decades ago.
In 2009 urban per capita income stood at 17,175 yuan ($2,500), or more than three times the average rural income of 5,153 yuan.
Wen added that the government would act to curb excess lending and high housing prices as authorities try to steer China's economy away from the easy credit and state investment that warded off the worst effects of the global recession.
"We will resolutely curb the precipitous rise of housing costs," Wen said, hinting at the government's fears that surging house prices could erode gains from economic reforms and possibly fuel social unrest.
He also said China would reform the "hukou" household registration system, relaxing regulations that often prevent China's 180 million migrant workers from getting access to social services such as education and healthcare.
Wen says China's economy is expected to grow by 8 per cent this year [EPA]
Earlier this week in an unusual joint editorial, 13 major state-controlled newspapers across China called for the abolition of the hukou passes, saying the system "shackles the people's rights".
Al Jazeera's Melissa Chan, reporting from Beijing, said the works report by Wen on the state of the nation was very focused on domestic issues and mostly centred on the economy.
While the Chinese premier began his speech by saying that China had weathered the 2009 global economic downturn, his speech was quite cautionary about the challenges ahead, such as dealing with unemployment, she said.
And aside from the usual reiteration of China's claim over Taiwan, there was not much said on foreign policy.
Wen barely touched on the politically-sensitive issue of China's currency, saying only that it would keep the yuan "stable".
Wen said special emphasis would be placed on improving the lives of ethnic minorities [AFP]
He also made no mention of either China's sovereignty over Tibet or the Dalai Lama, whom Beijing accuses of trying to "split" Tibet from China.
Instead, hinting at recent unrest in Tibet and in the far western region of Xinjiang he said the government would place a special focus on further improving the living standards of China's ethnic minorities.
"The Chinese nation's life, strength and hopes lie in promoting solidarity and achieving common progress of our ethnic groups," he said.
"We need to take a clear-cut stand against attempts to split the nation, safeguard national unity, and get ethnic minorities and the people of all ethnic groups who live in ethnic minority areas to feel the warmth of the motherland as one large family."
The meeting of the NPC is expected to last around 10 days and will be closely watched for signs of any political power shift.
Particular attention will be on whether China's expected next generation of leaders led by Xi Jinping, the Chinese vice president, and Li Keqiang, the vice premier take on a higher profile.
Both men are seen as the top candidates to take over the Chinese presidency and premiership when the current incumbents stand down.