The move aims to relieve worsening traffic congestion and air pollution in cities, the State Council, or China's cabinet, said at the meeting chaired by Premier Wen Jiabao, according to a statement published on the government's website.

China has announced a number of new infrastructure spending plans to help shore up a slowing economy, but has provided little detail on how they will be funded.

"Nowadays, the urban public transport system can no longer satisfy people's demand and lags behind economic and social development," the statement said.

"Therefore, we should make it a priority to develop the public transport network in cities," it said, adding that the system would incorporate buses, subways and tramcars.

Those companies involved in the construction or operation of public transport systems will be offered tax cuts and preferential prices on power and fuel.

Beijing will also channel private sector funds to invest in infrastructure related to urban public transport, it added.

Earlier this year, China opened a number of state-dominated sectors -- including many infrastructure projects -- to investment by private capital .

The latest announcement only provided a broad policy guideline without further elaboration.

(Reporting by Aileen Wang and Lucy Hornby; Editing by Jeremy Laurence)

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