The special subsidy system grants rural parents aged 60 and older a government subsidy of at least 600 yuan (US$77) each year, if they have only one child, or have two daughters.

More than 1.35 million aged rural parents have already benefited from the subsidy system which has been tried in more than 10 provinces since 2004, according to the report.

The report suggested that the country should extend the subsidy system to the whole country to cover 650,000 more qualified parents, as a way to improve their living conditions, and also as an incentive for younger parents to exercise birth control.

"It's time the subsidy system covered the whole country," said the report, pointing out that the annual cost of the subsidy system -- 1.2 billion yuan -- is modest compared to the government's annual fiscal revenues of 3 trillion yuan.

Average annual incomes in China's rural areas have grown at double-digit rates over the last three years but are still only about 3,300 yuan (about US$425).

Formulated in the early 1970s, China's family planning policy encourages late marriages and late childbearing, and limits most urban couples to one child and most rural couples to two.

The policy has helped the country reduce its population by more than 400 million.

But China now has a dramatically unbalanced sex ratio of 118 boys for 100 girls mainly due to Chinese people's traditional preference for boys, which reflects an inadequate social security network in rural areas.