China's stimulus package would fund paving roads like this one, making them passable year round and decreasing transportation costs. Photo: Thatcher Cook for Mercy Corps

China's $586 billion stimulus plan includes a whopping $14-plus billion for rural projects, according to The China Daily. And it couldn't have come at a better time.

Weakened demand for Chinese exports as a result of the global economic slowdown has led to widespread unemployment among urban factory workers and forced thousands of Chinese businesses to file for bankruptcy. In the province of Guangdong alone, over 9,000 factories are expected to close, leaving 2.7 million without work "Things have to be improved for these people who could be forced to return home to their villages," says The China Daily.

In China, a huge gap exists between rural and urban wealth. City-dwellers are three times richer than their rural counterparts. And the disparity exists in the education system as well: Shanghai schools receive ten times more funding than rural schools. Furthermore, The Guardian reports:

[L]ife expectancy in Guizhou is a decade shorter than in Beijing; child mortality in Qinghai is seven times as high as in the capital; and illiteracy in Gansu five times more common.

A huge influx of unemployed moving back in to rural areas could exacerbate existing economic inequality. But according to Liu Junsheng, a senior researcher with the Chinese government, "Increasing expenditure on rural development programs can create jobs directly for surplus laborers in the countryside. They don't even need to move to other cities because they can earn a living at home."

Past spending on infrastructure has made a positive economic impact by reducing transportation time and cost, the The Wall Street Journal reports from Qijiang.

The results are evident in this hilly corner of China's southwest, where a new expressway has cut travel times to the big city of Chongqing to 45 minutes from more than two hours. That's inspired local businesses to expand and outsiders to look for weekend retreats. Many villages are now resurfacing dirt roads to improve connections and ease travel further. Rather than selling their crop of Sichuan peppercorns from baskets on their backs, local farmers are loading them by the sackful onto trucks. Average annual incomes here reached about 4,100 yuan ($600) in 2007, up from 3,030 yuan ($450) three years ago.

If the stimulus plan can replicate these economic gains elsewhere, this short-term measure could make a long-term dent in China's rural poverty.