Premier Wen Jiabao said on Tuesday said the Chinese government should carry out urbanization "actively yet prudently," restrain the size of large cities and drive the development of their surrounding areas.

"Urbanization is a historical task in China's modernization drive," Wen told nearly 3,000 national legislators at the opening session of the 12th National People's Congress, China's top legislature.

Wen said the government should promote the sound development of urbanization by making plans scientifically, balancing geographical distribution, coordinating urban and rural development, using land economically and tailoring measures to local conditions.

He noted that small- and medium-sized cities, as well as small towns, should become better able to develop industry, provide public services, create jobs and attract residents.

In accelerating urbanization, the government should speed up the reform of the household registration system, create an equitable institutional environment for freedom of movement and expand the coverage of basic public services in urban areas to migrant workers and other permanent residents, Wen stressed.

The government's efforts to push urbanization may result in a paradox, however.

"People in big cities usually enjoy more job opportunities but have to endure much higher living costs, while in small- and mid-sized cities, living costs are lower but jobs are fewer," said Zheng Xinli, deputy director of the Policy Research Office of the Communist Party of China (CPC) Central Committee

Zheng urged the government to allocate more resources to develop small- and mid-sized cities and towns and boost their capacity to accommodate more people and industries.

"We should not develop any more megacities where the population exceeds 10 million," he said.

Currently, there are about 10 megacities in China with more than 10 million people each, including Beijing, Shanghai, Tianjin, Guangzhou and Chengdu, according to the latest census figures.

Zheng said the country should channel resources to focus on the development of mid-sized cities with populations between 500,000 and 1 million, as well as small cities with less than 500,000 people.

Fan Gang, an economist and former advisor to China's central bank, said urbanization is not equivalent to the development of cities.

"I hope the government can understand this point very clearly," Fan said, "We have ignored this in the past."

Many migrant workers can't enjoy the same benefits as urban residents, Fan said, adding that the urbanization drive should solve this problem through improved public services and reforms in rural areas.

China's urbanization rate rose by 1.3 percentage points to 52.57 percent last year, 0.5 percentage points higher than expected, according to data from the National Bureau of Statistics. The government expects the rate to climb further to 53.37 percent in 2013.

Urbanization means more people will leave rural areas to work and live in cities. But rural issues remain the major concern of the Chinese government, as the rural land system is central to maintaining rural stability and ensuring China's long-term development.

Wen said he saw faster agricultural development, more significant changes in rural areas and more tangible benefits in recent years than in any other period.

"Rural areas are the source of all the major and difficult problems that we face in building a moderately prosperous society in all respects," Wen said. "We must make solving issues relating to agriculture, rural areas and farmers a top priority in all of our work."

The government expects total grain output to surpass 500 million tonnes this year. It also plans to provide safe drinking water for another 60 million rural people, make safe drinking water available to 87 percent of the rural population and build or upgrade 200,000 km of rural roads.