Chinese officials have said that the global economic crisis has taken a toll on its economy and country is facing the grim prospect of growing unemployment with many company's resorting to massive layoffs which could lead to social unrest.

Yin Weimin, minister of human resources and social security, speaking at a press conference held by the State Council Information Office, said that the global slowdown has impacted the export industry as well as small and medium firms which has seen massive layoff due to shutdowns and now labor unrest of rural migrant workers is the ministry's "top concern".

He said that the employment scenario in the country is 'grim' and demand for workers is declining at a alarming pace with people looking for jobs in cities outnumbering new jobs by two-to-one.

According to Chinese officials, unemployment was worse in the month of October and is likely to go down further in the first quarter of 2009 with China experiencing a stable growth of 4 per cent during the first six months but became worse last month and jobless figures could hit 4.5 per cent by the year-end.

China's economy grew by 9 per cent in the third quarter after an explosive 11.9 percent growth last year but with the present global economic situation, it could further decline, warn economist.

As growth declines, the number of educated Chinese will grow from 5.59 million this year to 6.1 million next year and as 24 million from rural areas seek jobs in cities which can cater to only 12 million jobs.

Yin said that the country is facing unemployment problem due to massive decline in exports and small and medium firms which have labour intensive work like the manufacturing hubs, in Zhejiang and Guangdong provinces have seen massive layoffs due to production cuts and factory closures.

Evidence is mounting that an estimated 130 million rural migrant workers who have taken up jobs in Chinese cities as construction workers, factory workers and street cleaners in the boom time are facing bleak prospects. (See: China feels the pangs as the world slows down)

The impact is felt more in cities like the Dongguan, an exporting hub near Hong Kong, where thousands of workers are either unpaid or have lost jobs as the toy factories battle the downturn overseas. The local government had to intervene and give $3.5 million to the employees of Smart Union which sold toys to Mattel, Disney and Hasbro since 7,000 workers went on strike after losing their jobs due to the closure of the company.

Southern China, which had boomed due to the thriving manufacturing industry churning out electronics, clothing, toys and furniture and exported to the US, saw the worst decline as the global slowdown saw export orders plummeting and rising raw material and labor costs increasing. 

According to government and industry estimates, more than 68, 000 small companies nationwide collapsed in the first half of 2008 and about 2.5 million people could lose their jobs in the Pearl River Delta region by the end of the year.

These workers have now gone home which is of grave concern to the Chinese authorities as the massive influx of idle people in the rural areas could create a social problem and many provinces have lost out on tax revenues due to closure of these factories.

Yin, said "The current employment situation is still grim and our judgment is that in the first quarter of next year there will be even greater difficulties."

The Chinese government is hoping to boost employment in the private sector or ask graduates to take up jobs in the rural and underdeveloped regions of China by offering them lucrative incentives.

China is also confident that the $586 billion it has undertaken to pump in the economy early this month in low cost housing industry all over the country as well as in the rural infrastructure area and in the road, railway and airports, will create more jobs both in the urban as well as rural areas.