The National Development and Reform Commission (NDRC), China's top economic planner, has ordered local governments to establish a mechanism to peg benefits for low-income families with price levels by the end of the year.

Under the mechanism, if the consumer price index (CPI) rises to a certain limit, to be decided by local governments, extra money will be given to low-income families on top of the monthly benefit.

If the CPI has risen for several consecutive months, local governments can decide to raise the previous standards, said a circular posted on the NDRC website.

"We should make it a permanent mechanism to make sure the basic living standards of low-income families are not affected by rising prices," said Zhou Wangjun, Deputy Director of the NDRC's Pricing Department.