This comes as tightening fiscal measures - to limit investment and prevent the economy from overheating - and the introduction of a more demanding contract law threaten to stretch a situation where there is already a lack of jobs for the rural unskilled in the cities.

At the same time, factories on the outskirts of cities complain about not being able to find the right skilled talent, even with 20 million job-seekers entering the market every year.

Only some 12 million jobs are provided annually within mainland cities and towns, Mr Tian said.

'The employment situation that we're currently facing is very severe,' he told journalists on the sidelines of the National People's Congress, or Chinese parliament.

'This will continue for a very long time.'

Measures to combat the situation include setting up training programmes to upgrade worker skills and encouraging more start-ups to help with job creation, he said.

Job-searching services and an alert system that monitors employment statistics will also be improved.

Chinese Premier Wen Jiabao last week called for more measures to boost employment, saying that the urban jobless rate should be kept below 4.5 per cent this year, against the 4.6 per cent target last year.

Labour is a key priority for Chinese leaders, particularly as the wealth gap widens, creating potential for social unrest.

On the bright side, said Mr Tian, the urban jobless rate dropped to 4 per cent last year, even though critics have noted that such figures may not be entirely accurate given the vastness of the mainland economy.

Officials also defended the new labour contract law which requires firms to give permanent contracts to staff with over 10 years of service. The law faces resistance from employers concerned that it will raise costs and that it bans dismissal without cause.

The open-term contract is not 'an iron rice bowl', said Mr Sun Baoshu, vice-minister of labour and social security.

Compared with previous regulations, the law relaxes restrictions for ending a contract and improves labour relations, which will improve the investment environment, he noted.

vincec@sph.com.sg