BEIJING, March 5, 2008 (AFP) - Chinese Premier Wen Jiabao announced big budget increases for health, education and welfare on Wednesday, in an effort to reduce growing inequality across the country.

'Establishing a sound safety net for both urban and rural residents to ward off uncertainties for them has a direct impact on economic and social development,' Wen told the opening of parliament's annual session.

Against this backdrop, Wen said China would spend 276.2 billion yuan (about 39 billion dollars) on social security in 2008, 19.8 percent more than last year.

Spending on health care would rise 25 percent to 83.2 billion yuan, while the education budget would increase 45 percent to 156.2 billion yuan.

The spending rises in these social spheres are larger than the 17.6-percent increase in the military budget that the government announced on Tuesday.

Although China is going through a remarkable modernisation drive -- the economy has expanded at double-digit pace for the past five years -- the gap between rich and poor across the country has widened severely.

Wen acknowledged this problem on Wednesday as he said the wealth divide between the fast-developing cities and rural areas was continuing to grow.

'The difficulty of maintaining steady agricultural development and keeping the income of farmers increasing has grown,' Wen said.

'The growing development between urban and rural areas and between regions has not been checked.'