China said on Tuesday that local governments should use 10 percent of their funds raised through land transfer fees to boost education spending.

The Ministry of Finance and Ministry of Education said in a joint circular that local governments ranging from the provincial level to the county level must implement the new rule starting from Jan. 1.

The money will be used to improve rural schools and purchase teaching equipment, according to the circular.

As a part of the local government's education funding, local authorities should not reduce educational spending when creating their fiscal budgets, the circular said.

China aims to increase educational investment over the next year, aiming to have educational spending account for 4 percent of the gross domestic product (GDP) by 2012. The central government is continuing to search for more sources to boost spending.

According to data released by the Ministry of Housing and Urban-Rural Development, local governments raked in more than 7 trillion yuan through land sales to commercial developers over the past five years. The funds are largely used for compensatory payments following forced demolitions, as well as for rural land development, affordable housing construction and rural and urban infrastructure.

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