Beijing  - The world economic slowdown is developing into a potentially explosive social problem in China.

More than 20 million of China's 130 million migrant workers have lost their jobs as the government warns that 2009 was expected to be the "toughest" year for China since the new millennium began.

Officials are worrying that there could be unrest among the nation's 600 million impoverished rural residents and rising conflict with laid-off workers, who are often locked out of their worksites without being paid.

To prevent unrest from breaking out, the government has urged local functionaries to "go to the front line" to mediate rather than send in security forces to break up protests.

How serious the situation was being taken in Beijing was demonstrated by Chen Xiwen, director of the office of the central leading group on rural work, which advises the government.

"The police should not be deployed as long as there are no extreme cases of violence like beatings, looting or arson," Chen advised local officials.

For many, this week right after the Chinese New Year holiday, when migrant workers traditionally return to their home villages, marks the beginning of a quest for a new job.

However, job-placement officers are reporting a substantial drop in demand from employers for new workers, especially in export industries, and many of those workers who had lost their jobs found that they already lacked the money to travel home for the largest family festival of the Chinese year.

China's economic growth was expected this year to be halved from 2007's pace of 13 per cent while its industrial production has shrunk for six months in a row as the world economic downturn has lowered demand from China's export markets.

Prime Minister Wen Jiabao tried to lift his country's gloomy economic spirits while on his trip over the past week to Europe, saying in London that he saw "a light at the end of the tunnel."

He also said his government would implement further economic stimulus measures after announcing a 4-trillion-yuan (585-billion-dollar) package in November that was designed to stimulate domestic demand.

Experts warned, however, that China's economy has yet to reach bottom, expecting an improvement only in the second half of the year.

"We now have an estimated 25 [million] to 26 million migrant workers who are having problems finding jobs," Chen said while warning of social instability.

Entire farm families are often dependent on what a migrant worker earns in the city, which makes up an average of two-thirds of the families' disposable incomes.

Although Chinese in rural areas have been especially hard hit by unemployment, they are now being singled out to increase their consumption to raise domestic demand, offset a fall-off in exports and power China's economy.

"The biggest potential for boosting domestic demand lies in rural areas," said a policy statement by the State Council, China's cabinet, and the Communist Party.

It listed programmes through which billions of yuan could be pumped into rural projects or could directly benefit farmers.

However, the government already had difficulties substantially raising rural incomes in much more prosperous times. Despite well-meaning initiatives, the income gap between rural farmers and city residents has continually widened.

The current crisis also has highlighted China's lack of a social safety net, which prompts its consumers to decrease their spending rather than raise it at times of growing unemployment.

Consumption is dependent on the feeling of economic and social security as well as growing incomes, said Shen Minggao, an economist for Citibank in China.

Shen, warned, however, that such requirements for spending growth could not be delivered in a short time. (dpa)