The city government of Guangzhou will budget 600 million yuan ($88 million) annually to subsidize bus and metro companies for three years starting this year.

This is to encourage more people to make use of the public transport system at reduced fares.

The city government has agreed a total subsidy budget of 1.8 billion yuan for the three years and the reduced fare scheme will likely take effect in September, Nanfang Daily reported yesterday.

Beijing has been the most aggressive city to encourage people to take public transport. Last year, it cut the subway fare to 2 yuan and 0.4 yuan for a bus ride, the lowest in the country. The municipal government provided subsidies of almost 5 billion yuan last year to public transport operators.

Many Guangzhou residents welcomed the new fares and hoped they would be introduced as soon as possible.

Sun Yinan, who works in the city's downtown Tianhe district, said: "I have to spend 14 yuan a day on transport, if the fare can be reduced by about 20 percent, I can save about 3 yuan a day."

Guangzhou's subsidy is almost equal to that of Shenzhen where residents now spend about 20 percent less on public transport.

Peng Peng, a researcher with the Guangzhou academy of social sciences, said the subsidy is beneficial in several ways.

"More citizens will prefer public transport to private cars, especially when the price of oil is so high.

"Roads become less congested, exhaust emissions are reduced, and air quality improves," Peng said.