BEIJING China's cabinet has approved guidelines on transforming underdeveloped areas in megacities, in the government's latest move to support the economy, state media said on Friday.

The post-COVID recovery in China, the world's second-largest economy, is faltering as demand weakens at home and abroad, adding pressures on policymakers to roll out more support measures.

China will promote the transformation of "urban villages" - or underdeveloped areas - in megacities, as they pose a threat to public safety and social governance, state media said, citing a regular cabinet meeting.

Such transformation "is an important measure to improve people's livelihoods, expand domestic demand, and promote high-quality urban development," the cabinet said.

China will encourage and support the participation of private capital, the cabinet said, adding that authorities will raise funds for the change through multiple channels, efficiently utilise land resources, and combine the urban renovation with the construction of affordable housing.

The Politburo, a top decision-making body of the ruling Communist Party, pledged in April to accelerate the redevelopment of underdeveloped areas in megacities.

(Reporting by Beijing newsroom and Kevin Yao; Editing by Andrew Heavens and Frances Kerry)