Unemployment and corruption are the two most critical challenges facing China this year, according to a research report by an influential Beijing think-tank. The report, by the Chinese Academy of Social Sciences, was due to be published today, the Beijing Evening News said. It warns that unemployment and corruption could threaten China's stability, a vision said to be widely shared by grassroots officials. A taskforce from the leading think-tank interviewed more than 100 middle-ranking cadres. It found that 19.5 per cent of them thought unemployment was the most severe problem, up from 8.8 per cent last year. The research also revealed that by the end of September, the number of urban workers had dropped to 110 million, 3.6 million less than the corresponding figure in September 2001. Among them, 75 million were working for state-owned enterprises, down 4.4 million from last year. The number of laid-off workers finding new jobs dropped about 50 per cent from 1998 to 30 per cent in 2001, it said. Lu Xueyi, head of the survey, was quoted by the newspaper as saying that unemployment would worsen as more university graduates looked for jobs, and an excess of workers in rural areas was expected to further complicate the problem. Professor Lu said only 70 per cent of university graduates last year had found jobs. He expected the competition to be even more severe this year. He identified corruption as the second most critical problem facing China but insisted people were recovering their confidence in the authorities' ability to deal with it. From October 1997 to August authorities investigated 861,917 corruption cases, the report said. The report follows a call by party general secretary Hu Jintao for cadres to face up to hardships and difficulties, saying the nation must struggle for economic well-being.