The prolonged drought has added to the misery in rural areas
China has declared an emergency in eight northern and central drought-hit regions, where nearly four million people are suffering water shortages.
Nearly half of China's winter crop - some 10m hectares (24m acres) of wheat and rape seed - are also under threat.
President Hu Jintao and Premier Wen Jiabao ordered all-out efforts to fight the drought, allocating 400m yuan ($58m, £40m) in relief assistance.
China's drought relief office called it an event "rarely seen in history".
China faces droughts and floods annually but has seen a recent increase in extreme weather conditions.
The Chinese authorities say the current drought is expected to continue as no rain has been forecast in the affected areas for at least 10 days.
The Chinese leaders' decision was announced at a State Council meeting, according to the Xinhua news agency.
Government efforts should be directed at stabilising grain production, increasing farmers' income and ensuring agricultural production, the Council said.
The agriculture ministry says it is on red alert.
Eight wheat-growing regions - Hebei, Shanxi, Anhui, Jiangsu, Henan, Shandong, Shaanxi and Gansu - are under threat, Xinhua reported.
The official China Daily newspaper, citing meteorological authorities, said Henan had recorded its worst drought since 1951, going 105 consecutive days without rain.
Much of China's farming still relies on rainfall as many of its farming communities have a poor irrigation system.
The BBC's China analyst Shirong Chen says the prolonged drought has added to the misery in rural areas where millions of migrant workers have lost their jobs as a result of the global economic downturn.
A poor harvest in the summer would mean even less income for the farmers. The government is worried that this will dent its effort to stimulate consumer spending in rural areas, making it harder to maintain social stability, he says.