BEIJING - CHINA'S more than 700 million farmers are happier than before despite a growing wealth gap, while poor urban residents are being squeezed by rising food and property prices, a top government think tank said on Thursday.

Chinese farmers' satisfaction level has risen but that of urban dwellers has dropped, both due to a jump in food prices, which has driven up rural incomes but means people in towns and cities have to spend more, researchers say.

Annual consumer inflation is running at the quickest pace in over a decade, driven largely by a spike in food prices, which has pushed a government fearful of social unrest to pump up agricultural subsidies and tighten food exports.

Mr Li gave no details.

Still, it would be better if prices were brought under control, he told a news conference, carried live on government website www.china.com.cn.

'Controlling food prices and maintaining their stability are extremely important foundations for our social stability,' Mr Li said.

Last year the government, wary of student activism, ordered local authorities to give more help to university students struggling with soaring food prices after several campus canteen boycotts in protest at the surging cost of meals.

Rich-poor divide
The government is also trying to tackle a growing rich-poor, urban-rural divide, another cause of the rise in incidents of social unrest and violence in the world's most populous nation.

Mr Li said that gap was widening, although he gave no details, pointing instead to another worrying trend - unemployment.

While the problem was still concentrated in the old northeasterm industrial heartland, hard hit by the shift away from central planning to a more market-oriented economy, the situation nationally was becoming more complex, he said.

Even with a growing skills shortage, university students were paradoxically having a harder time finding work, added Yang Yiyong, deputy head of the National Development and Reform Commission's Socio-Economic Research Institute.

'I think one of the central issues here is students are not enterprising enough,' Mr Yang said.

At Beijing's elite Tsinghua University, only 1 per cent of graduates set up their own companies, compared to a quarter of US college graduates, he added, suggesting that it was a problem with China's learning-by-rote culture.

'It's not a problem with the students, but with our higher education system,' Mr Yang said.

'We need to change it to put more emphasis on creative education.' -- REUTERS