Unemployment in China is set to rise by up to 20 million people come the turn of the century, it was revealed yesterday. Senior state planner Wang Dongjin said more than a third of employed but surplus public workers would be laid off by the year 2000 as restructuring of state enterprises began to bite. Mr Wang, a vice minister at the State Commission for Economic Restructuring, said at least 54 million public employees - or 36 per cent of the entire state payroll - were actually considered surplus labour. Only a third of this total would become jobless, he said, with the rest being redeployed to other work units. But this would still see urban unemployment rise by 'about 15 million to 20 million'. 'Due to population growth and economic restructuring, resolution of the unemployment issue is a difficult matter,' Mr Wang said. 'It is an arduous task . . . but we must transform the mindset of these people to find new jobs. We must try to curb unemployment at four per cent.' China claims an urban jobless rate of three per cent, but these figures exclude redundant state employees or its 134 million surplus farm workers. Western analysts calculate true unemployment on the mainland at anything from 11 per cent, according to the World Bank, to a high of 20 per cent. Beijing has long resisted major restructuring of its moribund state enterprises for fear of the social unrest high unemployment might cause. But yesterday, another commission vice-minister, Hong Hu, said reform of the state sector was now 'the focal point of economic restructuring'. 'We must encourage mergers and bankruptcies,' he said, reiterating the official line that the state sector's most chronic money-losers must join with profitable firms or close. But he failed to number of debt-ridden enterprises to be shut this year. Tao Dong, senior regional economist at Schroders Securities in Hong Kong, said unemployment would be most acute in central provinces where most state enterprises were concentrated and economic performance already lagged behind coastal centres such as Shanghai. 'People in Shanghai are more fortunate than those in Changchun,' he said. 'Laid-off state workers can be naturally transferred to the service sector in Shanghai where they can work as taxi drivers and join the retail industry.' The industrial transformation would also be tough on the northeastern and northwestern regions, he said. To ease the social pain, Mr Tao said Beijing would need to provide special credits to individual enterprises. 'Cutting interest rates may boost the stock market but it will not benefit poor workers,' he said. 'The Government can release loans to specific companies and enable them to solve their labour problems.'