China's State Council pledged to further upgrade the funding system for the country's medical institutions in small townships and cities on December 6.

To ensure low-income earners can afford essential medications, the government will provide additional funding to these hospitals, while improving the funding system.

Since August 2009, over half of China's medical clinics in rural townships and small urban communities have been offering essential medications at low prices thanks to ongoing healthcare reform, according to a State Council executive meeting presided over by Premier Wen Jiabao.

However, some medical institutions were short of funds because of lowered drug prices.

According to the meeting, under the new system the operational expenditure of government-run hospitals and clinics in townships or urban communities would be covered by government subsidies and medical service charges.