LIAONING, the flagship of state industry, is besieged by soaring unemployment and social unrest, according to sources who recently returned from the province. A source who has visited Shenyang, the provincial capital, said most industries in the cities were lying idle and there were not enough orders to keep production going. 'Unemployment is very obvious. There is nothing to do. The factory chimneys aren't smoking nowadays,' one source said. Another source said: 'Petitions to the city government now become part of the people's daily round as the Government has difficulty in paying their wages.' According to a dispatch by the official Xinhua (New China News Agency) yesterday, the total number of 'redundant workers' in Liaoning stood at 1.59 million, including 1.04 million who were employed by state enterprises. The 'rate of redundancy' in Liaoning, Xinhua said, was 18 per cent. Unlike Western countries, China does not classify just its jobless population as 'unemployed'. Instead, 'unemployment' covers both people who have been laid off and idle workers who collected partial wages or nothing at all from their employers. The Xinhua report said in a bid to arrest the problem of joblessness, the Government had started a campaign to retrain half of its unemployed population in four years. State enterprises would be allowed to open new lines of business to accommodate half of the idle workers. The Government also hoped to provide new employment for a quarter of the unemployed and the remaining 25 per cent would have to find new jobs through their own efforts. Xinhua claimed that the Government should be able to keep unemployment below five per cent. Since paramount leader Deng Xiaoping kicked off his quasi-capitalistic reform more than a decade ago, state industries have lost much of their competitiveness and market share to the fledgling private and foreign-invested businesses. The sharp decline of the state industries which employed the bulk of China's working population have pushed the problem of unemployment to the forefront and forced the Communist Party leadership to look for solutions to keep the unemployed population calm. Wang Jianlun, head of a Chinese delegation attending an international conference on social security in Sydney, said China would establish a social security system with 'Chinese characteristics' by the turn of the century. Under the new system, according to Mr Wang, all urban workers would be required to contribute and a central fund with 'multiple resources' would be set up. Another official was quoted by the Hong Kong China News Agency as saying the central Government had decided to set up a national register of unemployed people.