China will also offer greater support for education and healthcare, Wen said, as well as stepping up energy-saving efforts and cutting pollution while trying to maintain the economy boom after four straight years of double-digit growth.
"We must put people first"
Wen Jiabao, Chinese premier
It will also maintain controls meant to contain a surge in housing prices, he told about 3,000 delegates.
Wen announced a total spending increase of 14.4 per cent to $338bn for 2007.
Under the 2007 budget, Wen also promised a technology upgrade for the country's armed forces, saying the government would work with other nations on global security threats.
He also reiterated Beijing's objections to Taiwan's move towards independence.
"We firmly believe that with the efforts of all Chinese people, including our Taiwan compatriots, complete reunification of China will definitely be realised," he said.
He said that China would promote direct transport and communications links to the island.
In his working report to the nation's legislators, the Chinese premier said the country's economic boom must be tempered with balanced growth.
"We must strengthen and improve macro-economic regulation," he said.
"The focus of this work is to keep the scale of fixed asset investment and credit under control and to promote overall balance between total supply and total demand.
"[We must] avoid seeking only faster growth and competing for the fastest growth."
Wen has announced similar economic growth projections before only to see the actual number far exceed the initial target.
Last year, he set the same target of 8 per cent, but the economy eventually grew by 10.7 per cent.
"Because of changes in the domestic and international economic environments, including the markets, the real GDP [gross domestic product] growth rate will vary a certain amount from the projected target," he said.
Wen also said China was committed to currency reform.
China faces a growing gap between the elite
and the poor majority[EPA]
"We will improve the mechanism for setting the renminbi [yuan] exchange rate ... strengthen and improve foreign exchange administration and actively explore and develop channels and means for appropriately using state foreign exchange reserves," he said.
The US and other nations believe the yuan is being kept artificially weak, giving Chinese exporters an unfair advantage on global markets.
But China, which does not allow the yuan to move more than 0.3 per cent against the dollar each day, has said it will reform its currency regime at its own pace.
Wen also announced China's budget deficit of around 245 bn yuan ($31.5bn) in 2007, down 50 bn yuan from last year.
"We need to continue to follow a prudent fiscal policy," he said.