The mass relocation is part of a strategy to lift 10 million people out of poverty by 2020, with 2 million estimated to be moved this year, the state council said in May.
The funds will be used mainly to construct homes, support facilities and basic public infrastructure, with the rest going to the restoration of vacated lands, state planner National Development and Reform Commision (NDRC) said in a document.
The investment will be financed mainly by China's two policy banks - China Development Bank and Agricultural Development Bank of China, who will provide 341.3 billion yuan in long-term loans and 50 billion yuan in construction bonds - as well as by local governments, who will provide 285.8 billion yuan.
Local governments will also raise up to 100 billion yuan through bonds, while the central government in Beijing will allocate around 80 billion yuan. Relocated villagers are expected to contribute 21.5 billion yuan.
China's poor make up about 5 percent of a population of 1.4 billion, living mostly in the countryside and earning less than 2,300 yuan a year, according to the government and state media.
Some of the villagers will move to areas with better social services, such as schools and hospitals, while others in remote areas will move to places with better roads and water supply.
China aimed to lift all its 70 million poor above the poverty line by 2020.
More than 12 million people were moved in earlier relocation efforts as of the end of last year, the NDRC said.