Police in southern China have taken into custody scores of youngsters suspected of being underage workers after a muckraking newspaper exposed a child labour racket this week. The government is investigating thousands of factories in one of China?s main export hubs, sometimes called the ?factory of the world?.

The scandal, first reported by the newspaper Southern Metropolis, is an example of the desperate measures employers are taking in the face of rising costs and a chronic labour shortage, experts in Chinese manufacturing say.

It also underscores challenges employers face verifying workers? ages and ones authorities face in enforcing labour laws, say factory managers and agents who export Chinese goods. The child labour scandal comes at a sensitive time for China as it readies for the Beijing Olympics in August.

A spokesman for the township of Shipai, an hour and a half north of Hong Kong, said police were looking after at least 79 children believed to be from the remote, impoverished area of Liangshan in Sichuan province. None had identification to prove their age, he said.

Southern Metropolis said hundreds of children from Liangshan, mostly 13-15 years old, had been sold or kidnapped to work in factories in the south, particularly in Dongguan, a major export centre where Shipai is located.

The story prompted swift reaction from the city government, which set up investigation teams to sweep for underage workers. A Hong Kong newspaper reported police had already rescued 167 children sold to work as slave labourers.

Walking down Shixing North Road, a nondescript side street in Shipai lined with small, three-storey factories churning out everything from luggage to computer parts, it is easy to see why.

On nearly every factory gate hangs a poster advertising work. Others announce that factory space is for rent, evidence that cost pressures are taking a toll. Competition for workers is fierce. ?All you need is a valid identity card to get hired here,? said a guard at a plastics factory seeking female employees.

But every lamp post along the street is covered from knee to eye level with stickers pedaling fake ID cards and official chops, each bearing a mobile phone number. A woman who answered one number said: ?We can do an ID by tomorrow morning.?

An agent who sources made-in-China bags for major ?big box? retailers in the United States and has been in the business over a decade said verifying age was a major problem. ?I have called workers in and compared the picture on the ID to the face. I?ve asked questions like ?When is your birthday?? It?s a real challenge,? he said.

Chinese law states that nobody under 16 can work, but despite periodic campaigns, enforcement of labour laws remains weak..