Although the Xinhua report gave few details of the programme, Chinese scientists said it included a large increase for GMO research, including a big portion to develop safety measures for GMO crops until the year 2020.

"There is significant growth in budget at between 4 to 5 billion yuan (US$584- 730 million) in the coming years," Lu Baorong, a professor with Fudan University and also a member of the country's biosafety committee with the agriculture ministry, told Reuters.

"Particularly a large budget was allocated on GMO safety research," said Lu.

Xinhua said the programme aims to obtain genes with great potential commercial value whose intellectual property rights belong to China, and to develop high-quality, high-yield and pest-resistant genetically modified new species.

"The plan's approval is a very positive signal to the future research and commercialisation of more GMO crops," said Huang Jikun, a professor with the Chinese Academy of Sciences.

The cabinet also urged relevant authorities to "waste no time to implement the programme and understand the importance and urgency of the programme".

"I think the sensitive issue such as (the commercial use of) GMO rice will come back to the agenda again," Huang Dafang, a researcher with Biotechnology Research Institute, Chinese Academy of Agricultural Sciences.

China, the global leader in developing GMO rice, has put off commercialisation of such varieties due to global consumer concerns over safety of transgenic crops, partly fuelled by GMO contamination also in rice products exported from the country.

FOOD SAFETY CONCERNS

The Beijing move was in line with steps taken by other countries addressing concerns over rising food prices and worsening supplies that threaten to push more of the world's people into poverty.

Rising food inflation has also led consumers in Europe and South Korea to accept what opponents call "Frankenstein foods".

"Food security is one consideration," said Xue Dayuan, chief scientist on biodiversity at Nanjing Institute of Environmental Sciences.

Xue said the programme also included research for livestock.

The programme's approval came ahead of the country's biosafety committee meeting at the end of this month to evaluate the safety of at least one strain of GMO corn.

Chinese researchers with the Biotechnology Research Institute told Reuters earlier that it hoped to get approval for commercial production of domestically developed phytase corn.

Some scientists, though, say Beijing will still hold off approval of GMO rice.

The cabinet last week approved a long-term grain output blueprint, which aims to increase grain production to more than 540 million tonnes annually by 2020 so it can be 95 percent self-sufficient in feeding the country's growing population of more than 1.3 billion people.

But analysts say that because China's arable land is shrinking every year due to industralization, the country has no option but to turn to genetic modification technology to increase yields.

"GMO technology is the only solution right now for the country to raise yield and reduce use of pesticide, which is harmful for the environment," said Huang Dafang.

China aims to produce 500 million tonnes of grain a year by 2010, but demand -- estimated at 518 million tonnes this year -- is projected to outstrip the pace of grain output.

Still, China will likely not have to import grain in the next year or two because it has ample grain reserves.

(Additional reporting by Nao Nakanishi in Hong Kong; Editing by Ken Wills)