The government will vastly increase spending on social security to improve people's livelihood and safeguard social stability and harmony.

The policy was announced during a meeting of the Political Bureau of the CPC Central Committee on Monday.

The meeting, presided over by President Hu Jintao, also general secretary of the CPC Central Committee, discussed a government work report to be submitted to next month's annual session of the 11th National People's Congress, the national legislature.

It is crucial to raise social security funding on "a large scale" to stimulate domestic demand in an effort to better deal with the global financial crisis, said Xue Lan, associate dean of the School of Public Policy and Management at Tsinghua University.

"The reasons that Chinese people love to save and hate to spend are a result of an underdeveloped social security system," he said.

The efforts to strengthen the social security network also reflect the government's fundamental policy of building a harmonious society that provides every citizen with basic welfare, particularly for the 737 million rural residents.

The social security system includes social insurance, old-age pensions, unemployment insurance and medical insurance.

The healthcare reform plan passed by the State Council last month is expected to spend 850 billion yuan (US$123 billion) on a universal primary medical service in three years.

The fast-aging country has pledged to increase pensions in rural and urban areas and improve health insurance with multi-channeled financing.

The minimum living allowance system has expanded from the cities to rural areas since 2007 - and covered about 23 million urban dwellers and 43 million rural people by January.

The meeting also pledged to increase large-scale government investment, implement a plan to revive industries and make great efforts to boost innovation, a statement issued after the meeting said.

It warned that "2009 would be the most difficult for China's economic development so far this century and the tasks of reform, development and stability are complicated".

Efforts should be made to increase domestic demand, change the development mode, accelerate the strategic readjustment of the economic structure; deepen reforms; improve living standards; and promote social harmony, the statement said.

(China Daily February 24, 2009)