China's workforce

Total: 712 million Urban total: 213 million SOE workforce: Fallen from 70 million high to 50 million last year Seven million of those laid off remain unemployed

Officials say that as the number of elderly people in China grows, the old system is unsustainable in the long term, and stifles the ability of state-owned companies to compete.

At the moment, many retired people and laid-off workers have not been paid or are still awaiting payment.

The changes come as China attempts to overhaul its welfare programme as part of its economic reforms.

The new programme is expected to cover about 200 million people, but not the majority of the population - more than 800 million rural-based peasants.

China's Minister of Labour and Social Security Zhang Zuoji said: "In rural areas... the main form of insurance is still provided by families, which completely conforms to the national condition and ethics of China".

Correspondents say the government is concentrating on maintaining social stability in cities, where potential labour unrest is seen as a threat to the Communist Party's rule.