"China is moving from an era of labour surplus into an era of labour shortage," the China Daily reported, citing the Chinese Academy of Social Sciences, the nation's key government-run research institute.

China 1.3 billion people constitute the globe's most populous country but the new study said its massive rural labour force, that has spearheaded the nation's roaring growth, may have been poorly estimated.

The number of unemployed workers below the age of 40 in rural areas that migrate in search of jobs is only about 52 million, far below previous estimates of 100 to 150 million, according to the institute

The shortage will eventually trigger a demand for higher wages, possibly as soon as in three years, it said.

Rising labour costs would in turn go right to the nation's economic heart as foreign investors forsake the world's factory floor for cheaper workers elsewhere.

While it was too early to judge whether more expensive Chinese labour would become less competitive, the nation needs to start making adjustments now, said Cai Fang, a labour economics expert and chief researcher of the study.

"The country needs to change its growth mode from relying solely on one production factor (labour) to advanced production methods," Cai said.

The report pointed to the recent worker shortages in the southern hub of Guangdong that has long relied on labour-intensive industries to compete in global markets.

"The phenomenon is spreading gradually from coastal areas to central China or even some provinces that boast huge labour surpluses," said Cai.