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The existing system for civil servants has lagged behind the development of the socialist market economy, bringing a negative impact on the enthusiasm and stability of civil servants in the country, Xinhua said.

Under the new arrangement, preferential payment will be given as incentives to encourage civil servants to work at the grass-roots levels.

Sixty per cent of Chinese civil servants work in governments at the county or lower levels, and 92 per cent are lower ranking, official statistics indicate.

The new wage system will give those low-ranking civil servants more opportunities to earn more. They will also receive more subsidies if they work in remote and poverty-stricken areas.

For employees of public institutions, their income will be closely linked to their work performance, according to the reform package.