The one-time allowance will be given to Communist Party veterans who fought in the battle against Japan during World War II.
Money will also be given to those veterans who fought under the Kuomintang Party.
The one-time payment is expected to be given out to around 50-thousand surviving veterans across China.
Li Zongyuan, deputy curator of the Museum of the War of Chinese People's Resistance against Japanese Aggression in Beijing, says the allowance is a symbol of respect and recognition to their contribution.
"Granting allowance to each veteran means the government recognizes their contribution at a time of war. Five thousand yuan is not a big number. However, for some aging veterans who are living in poverty, it could aid them financially. This is more of a spiritual award meant to give them the sense of respect they deserve, as well as some financial help."
91-year old veteran Luo Jianyuan lives in Chongqing.
"I fought five major battles, and was wounded twice. I was never granted 5-thousand yuan back then, which shows just how prosperous our country has now become."
This is not the first time the central government has allocated funds to these veterans.
In 2010, 3-thousand yuan was given to war veterans ahead of the 65th anniversary.
Yuan Hong with the Shanxi Provincial Civil Affairs Department says the number of surviving veterans in that province has dipped from around 10-thousand in 2010 to around 25-hundred today.
"The fact is the number of veterans has declined sharply. Earlier this year when we tried to confirm which veterans would take part in this year's anniversary celebrations, some of them later had to drop out just days after signing up, as their health became too much of a concern."
Many of the surviving veterans of the war are now between 90 to 100 years old.
Chinese Television commentator and host Cao Jingxing says its anniversaries like the one coming up next month which should help young people better-understand the sacrifices the veterans made.
"The spirit of veterans lasts forever but the fact is they are dying. Their numbers are dropping quickly. So, in marking V-Day celebrations, the first thing we should be doing is extending better care to our veterans. Many young people across China believe this, which is very meaningful."
Some living veterans are invited to view the parade on site.
A 70th anniversary medal will also be awarded to every living veteran.
They will also be given increased medical assistance in the future.
For CRI, I'm Min Rui.