Senior agriculture and rural development researchers suggest local governments should make more of an effort to channel surplus rural labour into small towns.

This will not only help cut unemployment in villages but also accelerate the process of urbanization, according to the experts, who gathered on Friday in Beijing to attend a symposium on employment in small towns.

The symposium was held by the Department of Professional Training and Employment under the Ministry of Labour and Social Security.

"Urbanization has become an important way to absorb the surplus rural labour force," said department head Xin Changxing.

As a result of urbanization, the number of rural residents working in cities increased by 7.8 million last year, compared with 1999, according to Xin.

Urbanization works on two levels - the development of larger metropolis and that of smaller cities and towns.

According to Ye Xingqing, deputy director of the Department of Rural Areas under the State Council Research Office, it needs at least 3.6 trillion yuan (US$435 billion) to reconstruct the current 18,000 towns, and another 4.8 trillion (US$580 billion) to build 12,000 new towns.

"Such investment will greatly promote the development of the national economy," said Ye, who added that policies may play an important role in persuading farmers into towns.

"The reform of a residency registration system is necessary, wanton collecting of fees from farmers should be forbidden, and farmers' contracts of land use in their rural homes should be kept for a period after they move into towns," suggested Chen Liangbiao, an official with the Ministry of Agriculture.

In addition, the development of small towns should be in tune with that of major cities, experts said.

China has yet to lift restrictions on the immigration of farmers into cities, for fear that an uncontrolled inflow - driven by heavy employment pressure in rural areas - will pile huge problems on cities.

Many experts believe that medium and large cities are more capable of absorbing labour, due to their better-developed tertiary businesses, while others suggest that small cities and towns should be the main destination for outgoing farmers to alleviate pressure on bigger cities.