management-labour relations in the new chinese economy

Management-labour relations in the new Chinese economy

Malcolm Warner, University of Cambridge

U nder Deng, China had set out on a bold strategy of interdependence with the global economy by launching the ’Open Door’ policy in order to encourage trade and technology transfer along with the ‘Four modernisations’ - of agriculture,

industry, science and technology, as well as defence - in the late 1970s (see Lardy, 1994; Nolan, 1995). It has since moved from an old-style ‘command-economy’ to a new ’socialist market-economy’. Today, with Deng’s recent demise and the Hong Kong handover, the eyes of the world are focused on this part of the world as never before.

In 1978 over 80 per cent of industrial production originated in the state-owned enterprise (WE) sector, whereas today its share has declined to under 35 per cent, achieved almost completely at the expense of the small-scale state firms. Economic growth has been impressive with an average rate of over 9 per cent per annum over the last decade, so real output almost quadrupled (Lardy, 1994: 3); the fastest growth-rate of any country in the world. Gross domestic product (GDP) continued to grow in real terms. Industrial growth rose by an annua1 average of 19.9 per cent from 1990 to 1994, peaking at 22.7 per cent in 1993, according to official statistics. If state-owned enterprises (SOEs) grew at 7.1 per cent per annum over this period, non-state ones surpassed this at an average of 38.5 per cent from 1990 to 1994. In this context, foreign-invested firms including joint-ventures (JVs) advanced by as much as 95.6 per cent. Nonetheless the SOEs still employed over 110 million workers. Urban collective enterprises accounted for 35 million employees, with town and village enterprises estimated to count for another 150 million, whereas joint ventures and foreign-funded enterprises officially only provided jobs for a fraction of this total, around 5 million people (see State Statistical Yearbook, 1995). However the real figure may be very much higher; some claiming around 30 million (Han, 1996: 169). Additionally, over 20 million work for privately-owned firms either as owner-operators or employees. However, in China the boundaries between the state and non-state sectors are blurred, with many collectives, TVEs, JVs, private and foreign-funded firms having partners in a governmental agency or part of the state sector (Goodman, 1996: 230).

From 1979 to the end of 1994, there were over 220,OOO foreign-funded enterprises (FFEs) approved, with a total contracted investment of US$300 billion, with $95 billion of it utilised. China thus became the most favoured recipient nation for inflowing funds. By the end of 1995 commitments had risen to 258,788 contracts of $394.5 billion, with $135 billion confirmed, amounting to almost half of the total capital inflow into developing countries. China ranks second to the US as a global destination for FDI. By far the largest foreign invest- ors are from Hong Kong/Macao (see Table 1). Of the total of inward-flowing funds in 1995, around half came from the above source. This achievement is formidable vis-ri-vis China’s modemisation process (see Chen, 1996). In this article I hope to explore how this may have led to changes in how Chinese enterprises and human resources are managed.

With the advent of the ‘socialist market economy‘, the position of Chinese workers has thus been in flux m t e , 1996). True, the standard of living has greatly improved for most,

30 HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 4


TABLE 1 Foreign investment in China (end of 2995)

US $billions Counties Actual Committed

Hong Kong/Macao 20.50 42.00 Taiwan 3.20 5.80 Japan 3.10 7.60 us 3.10 7.60 Singapore 1.90 8.70 South Korea 1.00 3.00 UK 0.91 3.50 Germany 0.38 1.70 France 0.28 0.64

Source: adaptedfiom Financial Times, 10 May 1996

but may have actively or passively exchanged employment security and welfare coverage for higher real incomes, particularly with the ongoing dilution of the ‘iron rice bowl’ employment system. On 1 May 1996 the Ministry of Labour announced somewhat optimistically that this practice would officially stop by the end of the year

As a linchpin of the state-owned industrial sector, China’s ‘iron rice bowl’ employment system (promising job security and cradle-to-grave welfare coverage in its state-owned enterprises) had its roots in the early 1950s (see Warner, 1995). Derived from the Soviet management system with full, direct urban labour allocation, it had also been influenced by Japanese employment practices in pre-war Manchuria and under the Occupation. Designed to protect those in state-owned industrial enterprises (henceforth to be referred to as SOEs), it eventually spread to cover the majority of workers in urban employment (see Walder, 1986). Although in some respects it resembled a ‘lifetime employment system’, comparisons with Japanese companies may be as misleading as illuminating, as the two country contexts differed markedly (see Chan, 1995; Warner, 1995). The system was centred on the ‘work unit’ (or danwei) and resembled a ’total community’. As we shall see later, it constituted the main stronghold of Chinese organised labour, involving over 100 million workers. As the economic reforms have started to undermine the system, we now have to see what effects this might have on management-labour relations, employment practices and human resources. It is not an overly straightforward issue, and the present study is but a first start.

Characteristics of enterprises

In order to deal with these issues, we initially investigated in depth a number of enterprises in the Beijing area. The JV firms chosen were then compared and contrasted with SOEs in terms of their management-labour relations, employment and human resources. Such Sino- foreign examples were, we hypothesised, most likely to implement Western (or Asian) HR policies. The empirical investigation was carried out in the winter of 1995 and therefore includes the impact on workplaces of the latest phase of the enterprise reforms and the newly-implemented 1994 Labour Law (see Child, 1994; Warner, 1995). The six firms investigated covered the following sectors which are reasonably typical of Chinese

HUMAN RESOURCE MANAGEMENT JOURNAL - VOL 7 NO 4 31


manufacturing industry: electronic components, lifts, motor vehicles, pharmaceuticals, transformers and TV sets (see Table 2). They were all sizeable in the number of workers employed. We compared their management-labour relations and HRM (or its relative absence) in both the Chinese JVs and SOEs, to see whether exogenous influences in effect made much difference.

TABLE 2 Case studies selected

1. Beijing Jeep 2. Beijing Guoxing Electronics 3. Schindler Elevators 4. Beijing Peony TV 5. Beijing Transformers 6. Beijing Pharmaceuticals

The Sio-foreign JV firms we investigated had all been founded in the 1980s. Schindler Elevators, a joint project with a Swiss company, was the oldest (1980); next came US- partnered Beijing Jeep (1984); and most recent was Beijing Guoxing Electronics, a Hong Kong/ Japanese-funded venture (1988). Of the SOEs, Beijing Pharmaceuticals and Beijing Peony TV were relatively old state firms (both 1973) but Beijing Transformers was set up in 1950 and was a typical example of such post-Liberation cases. The latter three firms had earlier been included in Child’s (1994) sample under the headings of ’audio-visual’, ’heavy electrical’ and ‘pharmaceutical’ respectively (1994: 4). In-depth background material was therefore available for this sub-set of enterprises. Similarly, Beijing Jeep had been investigated previously by several authors (see Aiello, 1991; Mann, 1997, for example) and secondary accounts were also available on Schindler Elevators in the form of press-cuttings.

On-site visits to the six enterprises studied enabled me to collect first-hand data in-depth, using a semi-structured questionnaire, with the help of graduate assistants from Tsinghua University. Subsequently, data was further obtained from written materials translated by colleagues. The methodology deployed in this study follows earlier empirical work of mine (see Warner, 1995, for example) and it is hoped to extend the sample to other Chinese cities. The analysis is focused on both quantitative as well as qualitative data collected at the organisational level, rather than the group or individual, although qualitative interviews were undertaken with key decision-makers such as enterprise managers, personnel directors, trade union chairpersons or others, as well as lower-level representatives of the workforce.

In terms of turnover, the firms vaned greatly, ranging from 30 billion RMB (Beijing Jeep) in 1994 to 76 million RMB for Guoxing Electronics in the same year for the joint-ventures; they ranged from 1.5 billion RMB for Peony TV to 50 million RMB for Beijing Pharmaceuticals in 1994 for the SOEs (see Table 3 for full details). Beijing Jeep, the firm with the largest turnover, was also the biggest in terms of the number of workers employed (see Table 3). Net profit figures may be more contentious, although those reported for the Jvs may be more reliable than those for the SOEs because they may have used more reliable accounting methods. Caution should always be taken when dealing with any such figures in the Chinese context.



TABLE 3 Characteristics of selected case studies

Joint-ventures State-owned enterprises Case no 1 2 3 4 5 6

Company Beijing Jeep Guoxing Schindler Beijing Beijing Beijing (US) Electronics Elevators Peony TV Trans- Pharma-

(Hong Kongl (Switz.) formers ceuticals Japan)

rypeoffirm JVsince JVsince JVsince SOEsince SOEsince SOEsince

Product Auto Electronics Elevators TV sets Transformers Royal jelly

rumover 30 bn 76 m 5.5 bn 1.5 bn 1.2 bn 50 m

Vet profit 2.1 bn 3.5 m 52 m 350 m 250 m 5 m

uo of 7,000 >1,100 >1,500 >5,400 >2,300 >1,000

1984 1988 1980 1973 1950 1973

(1994), RMB

(19941, RMB

employees (Beijing)*

plus 1,800 employees in Shanghai

MANAGEMENT-LABOUR RELATIONS

The National People’s Congress passed a new labour law on 5 July 1994 (to come into effect on 1 January 1995). The text was then published in the Renmin Ribao (People’s Daily) newspaper and consists of 13 parts (see Table 4 overlean. The main goals of the new legal framework (see Josephs, 1995; Warner, 1996b) may be summed up as follows: 0 workers have the right to choose jobs, to be paid, to have rest and holidays, to have protection in the workplace and to receive training to improve their skills; 0 no employment permitted of children below the age of 16; 0 no discrimination on the basis of race, nationality, sex or religion; 0 women to enjoy same rights as men; 0 minimum wage levels to be set by local governments and reported to the State Council; 0 contracts must be customary between employers and workers, setting out pay, conditions, ’ tasks to be performed and terms when contracts can be terminated; 0 enterprises on the brink of bankruptcy or in grave difficulties may reduce working staff, provided that the decision is agreed upon by the trade union organisation in the enterprise or after consultation with all staff members; 0 average working week not to exceed 44 hours, with one day off a week; 0 working day to be limited to eight hours; 0 women not to work in mines, in conditions of extreme temperatures and after seventh month of pregnancy. After birth, at least 90 days of leave should be given; 0 dispute committees to be set up in workplaces to include both employers and workers.

In essence, the new Labour Law is aimed at the new economic conditions and attempts to solve emergent problems arising from such changes. It sets out to regulate ‘a labour system compatible with a social market economy’. The subtle and sometimes elusive implications of its clauses suggest that, although it focuses on many social changes, it is not necessarily able



TABLE 4 Contents of 1994 Labour Law

1. Principles 2. Employment promotion 3. Labour contracts and collective contracts 4. Working hours and holidays 5. Wages 6. Labour safety and hygiene 7. Protection of women and young workers 8. Vocational training 9. Social security and welfare 10. Labour disputes 11. Monitoring and inspection 12. Legal obligations 13. Supplementary

Source - 2994 Labour Law: 1

to solve the broader range of problems which have arisen from the economic reforms. Embodied in it is an attempt to re-balance the power distribution in the industrial relations system whereby the role of the state is adjusted rather than weakened. Trade unions are given more autonomy but within lunited parameters. Parties involved in the new ‘contract relations’, however, will find it more difficult to preserve their ’socialist’ privileges than under the ‘iron rice bowl’ system.

The reaction to the new Labour Law of management and trade union chairpersons interviewed varied from apparent enthusiasm to anticipated but passive compliance. In Beijing Jeep the management said that it would carry out the new policies stipulated, such as the new &-hour week based on the eight-hour day. The trade union chairman said he would ne- gotiate overtime at the legally prescribed rates, if the plant union committee approved this.

A similar response followed at Beijing Guoxing Electronics particularly concerning the five-day week. Schindler Elevators indicated compliance with the new 1994 law because - as the trade union chairman put it - it was intended ‘for the benefit of the workers’. The Beijing Peony TV union spokesperson in turn saw the law as ’making the trade unions more important in the plant’. The response in Beijing Transformers was that the new law ‘was necessary in a socialist market economy to help the workers’, but it ’would take a long time to fully implement’. In Beijing Pharmaceuticals the reaction was said to be ‘good for workers, not so good for managers’ (see Table 5). It was hardly expected that they would do other than indicate general approval for the Labour Law, but some reactions were a little ambiguous in a number of cases.

Labour contracts Management-labour relations are now changing in a number of ways. Since the mid-1980s Chinese enterprises have slowly begun to abandon the ’iron rice bowl’ of ‘jobs-for-Me’ and ’cradle-to-the-grave’ welfare coverage for their employees, as noted earlier (see Walder, 1986; Lu, 1989; Warner, 1995; Zhu, 1995). After 1986 they introduced fixed-period labour contracts for new employees. By 1992 this procedure was extended in pilot-enterprises to all their employees and in 1995, through the above new Labour Law (see Zhu and Campbell, 1996



43), to a wide range of SOEs, although some categories of employees retained legally valid open-ended contracts (see Josephs, 1995).

All three of the JVs in the present sample had virtually 100 per cent of their employees on individual labour contracts. Such contracts set out terms of employment, such as res- ponsibilities, pay, conditions of work, length of contract and so on. Beijing Jeep also had a collective contract which was a kind of 'framework agreement', but not comparable to a Western collective bargaining one; !%hider Elevators expected to have one signed shortly. Only one of the SOEs, Beijing Peony TV, had both individual and collective contracts; Beijing Pharma- ceuticals only had individual contracts; and Beijing Transformers had neither (see Table 5).

Collective contracts were only found in one JV (Beijing Jeep) and one SOE (Beijing Peony TV): such contracts were 'new-style' collective examples and were to be found as yet in only a l i i t ed number of firms. They differed from the 'old-style' ones in allegedly excluding the workers' representatives from management decision-making procedures, except those relating to matters defined in the framework collective contracts, namely wages and conditions of work (interviews with Ministry of Labour and ACFTU Head Office personnel, November 1995).

Reward systems

Another shift in Chinese management-labour relations is in the nature of rewards systems. Previously, the 'iron rice bowl' in state enterprises had coexisted with an egalitarian wage payment system involving a flat reward structure for much of the time (see Takahara, 1992). Previously, as Chan (1995: 390) states:

In everyday life ... at the enterprise level, state workers did not usually confront factory authorities with demands for pay rises, knowing that the factory's Party secretary was in no position to adjust the nationwide wage scales set by the government. The most acrimonious issue with regard to their immediate superiors had always tended to be one of fairness in redistribution. The workers targeted their anger towards the labour models, the political activists who mouthed the appropriate political slogans with gusto, or anyone who had risen and undeservedly gained additional material awards through a particularistic relationship with management.

Since the mid-l980s, major changes have taken place, with material rewards becoming more predominant. Since the 1992 enterprise reforms, this approach has been further extended to selected SOEs, particularly in the northeast, and by 1995 to all large and medium- sized ones (see Warner, 1996a: 204). The old wage grade system was abandoned nationally and the new 'post plus skills' (gangji gonzi zhi) system was adapted. As a recent account puts it: 'Operationally, the new system is said to render it easier to quantify the workers' performance and easier to link such performance to pay' (Minghua and Nichols, 1996 14).

Turning now to the case studies at hand, both JVs and SOEs had moved to a performance-based rewards system after the 1986 and 1992 reforms. Of the JVs, Beijing Jeep had a 'post plus skills' system, with age, position and skills determining the basic wage plus a quarterly bonus related to sales. Beijing Guoxing Electronics had a rewards system related to age, position and skills with a monthly efficiency-based individual bonus and an end-of-the-year collective bonus related to profits; Schindler Elevators had a similar system.

State-owned firms were now as likely to use profit-related pay schemes as others. Of the SOEs, Beijing Peony TV also used the above formula, plus a monthly group bonus. Beijing Transformers paid the basic wage as above, and monthly individual and collective bonuses, which went up by one percentage point for each similar growth in profits.



Beijing Pharmaceuticals had a basic monthly wage, plus individual and group bonuses (see Table 5). There was no common pattern of wage grades (the eight-grade system had definitely gone) among the State firms, with variations currently ranging from 10 to 14 worker grades.

Wages varied greatly both between JVs and between SOEs in 1994. Beijing Jeep paid the most to their employees at over 1,000 RMB per month - a figure not uncommon in large JVs (1,500 RMB by 1995). Schindler Elevators followed at over 700 RMB (1,000 RMB in 1995). Beijing Guoxing was much lower at 550 Rh4B (680 RMB in 1995) - a figure much closer to the average urban wage for industrial workers (4,538 RMB for all workers in 1994,4,797 RMB for SOEs and 6,303 RMB for JVs and others). The highest-paying WE, Beijing Peony TV, overlapped with the latter two at over 700 Rh4B (750 RMB in 1995) with Beijing Transformers at over 550 Rh4B (600 RMB in 1995) and Beijing Pharmaceuticals at over 450 RMB (500 RMB in 1995). Social insurance has also been reformed in all six firms, with a greater contribution to be paid by employees. The upshot of these reforms has been to introduce ‘economism’ into workers‘ attitudes in not only J V s but also SOEs; something once denounced under Mao but now seen as almost normal under the new market logic (see Chan, 1995 39).

Role of trade unions

The role of Chinese trade unions - in the form of the All China Federation of Trade Unions (see Lee, 1986) - in management-labour relations has also changed. Since their inception, the unions had been based on the Leninist transmission-belt model and tended to mainly stress production values, perhaps at the expense of their representational rationale (see Ng and Warner, 1998). They have not been seen as bargaining freely, or negotiating wage levels, as is normally the case in Western countries (Warner, 1996a: 195-196). As Chan (1995: 37) puts it:

TABLE 5 Management-labour relations in selected enterprises

Joint-ventures

1 2 3

Company Beijing Guoxing Schindler Jeep Electronics Elevators

Labour 100% 100% 100% contracts individual individual individual

& collective & collective Av. wages > 1,000 > 550 > 700 (1994) monthly

rade union * 95% * 95% 100% membership mainly social compre-

function hensive union role

Workers‘ meets meets meets Congress annually annually twice

yearly

State-owned enterprises

4 5 6

Beijing Beijing Beijing PeonyTV Trans- Pharma-

formers ceuticals

100% None 100% individual individual & collective

> 700 >550 >450

8045% 95% 100% compre- integral mainly hensive role welfare union role

activities

meets meets meets annually annually twice

yearly



The ACETU was assigned two functions: by topdown transmission, mobilkation of workers for labour production on behalf of the State, and by bottom-up transmission, protection of workers’ rights and interests.

Formally at least, trade unions were supposed to implement the details of resolutions passed by enterprise-level Workers’ Congresses. In the everyday work of the enterprise, union officials were expected to look after the ongoing welfare needs of their members. They were, for example, concerned with the allocation of housing within work units. The average level of unionisation in the SOEs was probably around 90 per cent, but in JVs and FFEs it was generally much lower. Estimates vary, but by July 1994 there were estimated to be only 1.3 million union members in all firms in the foreign-funded sector (see Gongren Ribao/Workers’Daily, 4 July 1994 1).

The role of the official trade union (the ACFTU) still remained primafucie strong in both the JV and SOE subsets studied here. In terms of union membership, for example, Beijing Jeep claimed 95 per cent (mostly ‘active membership’), as did Beijing Guoxing Electronics - whose union carried out ’a mainly social function’ - with Schindler Elevators claiming 100 per cent (involving ’a comprehensive union role’). In Beijing Peony TV. (with ’comprehensive union activities‘) there was around 80-85 per cent union membership, but in Beijing Transformers (where the union played ’an integral role’) it was as high as 95 per cent and in Beijing Pharmaceuticals 100 per cent coverage was alleged (with the union claiming a ’mainly welfare role‘) (see Table 5).

Workers‘ Conaress

While the ACFTU operated in a top-down manner in its conduct of management-labour relations, it had since the early 1BOs developed a nominally-representative workplace mechanism (see Warner, 1995: 29-30) known as Representative Staff and Workers’ Congresses and involving around 10 per cent of the workforce as members. In spite of the wide-ranging changes in management policies since 1992, all the firms studied here still had ongoing representative Workers’ Congresses, whether JVs or SOEs, although their roles had become even more ’cosmetic’ than before. On the former subject, Beijing Jeep and Beijing Guoxing each met once a year, with Schindler Elevators meeting twice a year. In the SOE sub-set, Beijing Peony TV met once a year, as did Beijing Transformers. However, the Congress in Beijing Pharmaceuticals convened their meeting twice a year. Ad hoc sessions could be called, if necessary, in all cases. In the case of JVs, their role was mostly consultative and they normally did not take a direct part in managerial decision-making, as was alleged in the SOEs, but met as a formality to discuss company policy, the previous year’s performance and the plan for the next one (see Table 5).

There is said to be great cynicism on the workers’ side about the role of the Workers’ Congresses, but also some ambivalence - for example, a recent ACFTU survey argued that over 90 per cent of workers thought the major issues proposed by management should be endorsed by the Congresses (Chan, 1995: 43). However, in a study carried out by White (1996), over 80 per cent of workers believed their Congress was not in fact consulted or asked for a judgement on major issues.

ROLE OF MANAGEMENT

Under the reforms of the employment system, Chinese managers have had greater potential freedom to ’hire and fire’, as noted above (Child, 1994; Warner, 1995). Even if fully-fledged HRM on Western lines seems a little far away, many personnel policies have now substantially changed: workers are employed on fixed-term contracts, apprenticeships have been



reformed, and training has been expanded for both workers and managers in most JVs and SOEs. Even so, many employees have been resistant to change and the seasoned observer will remain sceptical about reforming entrenched personnel practices in the short- to medium-term. The role of the personnel director in all six enterprises studied here included dealing more directly with what we may call 'human resources' - although they did not use this term explicitly, referring instead to personnel management (renshi guanli). In the JV sub- set, BeijGg Jeep's personnel director dealt with 'hiring, firing and wages'; in Beijing Guoxing Electronics with 'hiring, firing and contracts'; and in Schindler Elevators with 'recruitment, salaries, rewards and sanctions'. In the SOE sub-set, Beijing Peony TV's personnel director dealt with 'labour resources and training'; in Beijing Transformers, he 'collaborated with the unions on rewards and training'; and in Beijing Pharmaceuticals, that person concentrated on 'wages and labour resources' (see Table 6). Of the six firms' brochures, only one had a specific personnel philosophy stated; this was Peony TV's, which said that since 1989, it had started to build its own enterprise culture, with 'people as the core'.

Recruitment and training

From 1949 onwards, until quite recently, there was no labour market to speak of in the PRC. Before the reforms of the employment system, workers were for many years assigned to job positions in specified enterprises (Lu, 1989: 107). Central control was gradually relaxed for college and university graduates. Recently, there have been many further changes vis-his past hiring practices (see Warner, 1986; 1995), with the emergence of a nascent labour market:

The rapid development of employment agenaes has created job opportunities for and promoted the mobility of the labor force ... By the end of 1995 some 30,OOO employment agencies at various levels had registered 67.74 million people, with 50.87 million finding employment. Beijing Review, 1996b 4

TABLE 6 Personnel management and HRM in selected enterprises

Joint-ventures State-owned enterprises Case no 1 2 3 4 5 6

Company Beijing Jeep Guoxing Schindler Beijing Beijing Beijing Electronics Elevators Peony TV Trans- Pharma-

formers ceuticals

Role of person- Hiring, Hiring, Recruitment Labour Collaboration Decides neldirector firing firing, salaries, resources, with unions wages,

wages contracts rewards training on rewards resources

Recruitment Agencies/ Mostly tech. Uni./train- Uni./high Uni./own Uni./own and training own train- schools/ ing schools, schools/tech. tech. tech.

YO labour turn- <1% 5% 1-2% 2% 5% 1 Yo over (1994)

Dismissals (1994) 6 2 10 50 low l o r 2

Disputes Small 0 Very few 1 0 Some (but not intense:

sanctions and salary

ing schools colleges other firms colleges school school



Most of them now recruited directly from education and technical institutions and some from their own training schools. However, mobility between enterprises is still relatively low (see Zhu and Campbell, 1996 37).

The Beijing Jeep personnel director said he sought workers from such ’recruitment agencies‘ (namely, from the labour market) and their own training schools; Beijing Guoxing Electronics from outside technical schools and colleges; Schindler Elevators from universities and training schools as well as ’poaching’ on other firms (using the labour- market); Beijing Peony TV from universities, high schools and technical colleges; Beijing Transformers from universities and technical schools; and Beijing Pharmaceuticals from universities and technical schools (see Table 6). Evidence of labour market forces did convincingly emerge from the study.

Turnover

Before the economic reforms, job mobility in China was virtually zero. According to Lu (1989: 107-108): ‘The individual is not only unable to move a single step if he leaves his unit, he also loses his identity as master.’ In the past, very few Chinese workers ever changed their place of work (Warner, 1995: 48). Turnover was reported as still being relatively low in the six firms studied. It varied from 1 to 5 per cent - the latter representing a recent change - across the firms in question, but the two cases at the upper level were dispersed across the two sub-sets. It was less than 1 per cent in Beijing Jeep; 5 per cent in Beijing Guoxing Electronics; 1 to 2 per cent in Schindler Elevators; 2 per cent in Beijing Peony; 5 per cent in Beijing Transformers; and 1 per cent in Beijing Pharmaceuticals (see Table 6) . Such workplace behaviour can be contrasted with other formerly state socialist economies, as we shall see below.

Dismissals

According to the late David Granick, writing in a World Bank study of Chinese SOEs (1987 103), the labour market was previously much weaker in China than in the former Soviet Union in the mid-l980s, an observation which would have greatly interested specialists in comparative labour systems.

Dismissals are now finally easier in law, but do not appear to be so in practice. They were very low in all six firms - never higher than 1 per cent, although labour discipline was now said to be much higher. We set these out in specific numbers - rather than percentages, given the very low figures - as follows: Beijing Jeep, six people; Beijing Guoxing Electronics, two; Schindler Elevators, 10; Beijing Peony TV, 50; Beijing Transformers, ‘low’ (no specific figure given); and Beijing Pharmaceuticals; one or two (see Table 6). In some enterprises, workers formally resigned rather than being dismissed; others were formally sacked after ‘disappearing’ off the job completely - perhaps to indulge in xia h i , Literally ‘jumping into the sea’ of private business activity.

Disputes

Since the trade unions were held to be ’masters’ (zhuren) after 1949, adversial management- worker relations were not supposed to be the norm. Disputes in Chinese enterprises were thus allegedly rare in the past (Warner, 1995: 204, note 5) but as the ’iron rice bowl’ system is now being phased out as part and parcel of official policies to reform Chinese industry, industrial conflict has been growing.

Evidence from the grass-roots suggests that the seeds of conflict have been deeply planted. As one ACFTU-sponsored report relates:



Many workers have serious housing problems and cannot get any help from the enterprise. In the Workers’ Congress, workers occupy the fewest seats and their proposals are the least likely to be adopted. The enterprise Party Committee has shifted the focus of its recruitment from among mass workers to managerial and technical staff members. In China, Party membership is still important in boosting individuals’ life changes. During the reform period, workers’ chances of joining the Party have been reduced. Both surveys find that most workers tend to start their routine working day with a tense feeling and that most managers enter their offices feeling happy and relaxed.

While the status of workers as a whole is declining, production workers have suffered the most serious set-back in terms of social position in the past decade. This is reflected most markedly in their wage levels, possibilities for job transfer, and opportunities for training and promotion. According to the ACFTU’s finding, production workers are placed near the very bottom of the enterprise wage ladder. The job-transfer rate and the promotion rate for these workers are the lowest among all the enterprise employees investigated.

Feng, 1996 26

We have thus seen that the introduction of redundancies, differential material rewards and greater social insurance burdens for individual workers have generally become a feature of the employment reforms since the early 1990s. Such reforms are being extended to the whole state-owned sector, if perhaps with growing resistance by those workers who stand to lose from them. As other workers are perceived as receiving higher wages, feelings of relative deprivation may further lead to worker discontent in this sector. It must be noted that there is no ’right to strike’ - it was removed from the Chinese Constitution in 1982. As Chan (1995: 58) puts it:

Unrest is brewing among the ‘old proletariat’, the permanent workers in the core state industrial sector, with the financial losses recently suffered in many of these enterprises and the accompanying reductions in real worker income, welfare benefits and job security, a rash of wild-cat protests erupted in 1994.

The incidence of industrial conflict in Chinese enterprise is therefore a still sensitive issue. Managers and trade union chairpersons interviewed in all six enterprises tended to gloss over its existence and frequency. In Beijing Jeep, the number of disputes was said to be ‘small‘ (a worker damaged a car and had to be fired); in Beijing Guoxing Electronics, ‘none’; in Schindler Elevators, ‘very few‘ (negotiated with the union in a ‘friendly’ way); in Beijing Peony TV, ‘one’ (about salary-levels); in Beijing Transformers, ‘none‘ (nobody moved out of the firm, which has a ‘no contract‘ contract); and Beijing Pharmaceuticals claimed it had some disagreements with workers, but these were ’not intense - they could be solved by joint discussion via the trade union’ (see Table 6). As urban as well as rural unemployment grows over the coming years, and as the ‘iron rice bowl’ is further dismantled, greater industrial conflict is increasingly likely.

DISCUSSION

The implications from the above evidence for management-labour relations are both interesting and substantive. There are clearly great changes taking place in China, not only at the macro-economic sphere, but also at enterprise level. The reforms introduced in the 1980s set the scene, but in the 1990s moved the management-labour relations, employment and human resources closer to external models, whether Western or Asian. Yet due to institutional and organisational inertia, the shift from the older practices has only been partial, especially in larger enterprises, whether SOEs or even Sino-foreign JVs.



Since what has emerged may be at best dubbed ‘HRM with Chinese characteristics’ (see Warner, 1995; 1996c) because of the imperfect nature of the transformation from the older to newer system of management-labour relations, the weight of evidence rests upon the specificity argument rather than a universalist one. If there is any drift to ‘convergence‘ between the Chinese and foreign employment systems, it is only partial and will probably take some decades to achieve, if at all.

For example, Child (1994: 259) noted that in all but one of the 30 JVs he looked at, ‘foreign managers observed a large difference between human resource management in their own home company and those they were obliged to accept in China’ (1994: 259). It is this variance which underlies the sceptical position held by the author regarding the implantation of Western-style HR practices in Chinese enterprises.

In the JVs or SOEs studied in the current Ekijing-based case studies, the term ’HRM’ was not generally used, except possibly in the case of Beijing Jeep. The terms ’personnel management’ (renshi guunli) as well as ‘labour and personnel management’ (laodong renshi guanli) rather than HRM (renshi ziyuan guanli) were usually used. In a previous study of SOEs in the northeast (Warner, 1995: 96-106; 199k 32-43), the terminology of HRM was not employed at all. Many writers often use the term ‘HRM’ relatively flexibly as a synonym for personnel management in China (see Zhao, 1994; Zhu and Dowling, 1994; Verma and Yan, 1995, for example). Indeed, the Chinese notion of personnel management has usually been seen as hanging on control and conformity with a stress on the value of work, whereas Western practice is seen as related to organisational effectiveness (Child, 1994: 259).

Furthermore, employee appraisal has been confounded by inappropriate job contracts; tightening up on time-keeping has been spoilt by lax practices in the Chinese enterprise culture; promotions have not been easily accepted due to the egalitarian norms found locally, and so on. Dismissing workers was still resisted, as we found in the six case studies. Our own conclusions point to a very limited implementation of HRM, even in JVs’ own actual practice. In the state firms we looked at, Peony TV said it put its ’people at the core‘ in its enterprise culture, as noted earlier, but none of the others explicitly stated this. It seems therefore easier to transfer ‘hard’ technology across frontiers than its ’soft’ counterpart.

Chan (1995: 45) found Western managers on similar sites trying to adopt a non- adversarial - almost Japanese - management culture, but not without obstacles in their path:

On the shopfloor they try to solicit workers’ opinions on the work process, and to encourage an individually responsible work ethic among the workers. They also try to introduce more formalized, rule-abiding management practices and to decentralize authority to middle management. Promotion prospects are based on career ladders and quantifiable achievements (as opposed to the Chinese state’s subjective criterion of ‘good behavior’, which promotes partiality in promotions and, understandably, workers’ disaffection). The Western managers soon find that introducing HRM changes are not easy. There is widespread unwillingness up and down the hierarchy to make decisions and take responsibility in the production process.

CONCLUDING REMARKS

In short, management-labour relations in China are clearly in flux. In the present sample of JVs and SOEs we investigated, we found the implementation of many of the 1992 enterprise reforms and their later extensions, and to some degree of the recent 1994 Labour Law, although it is too early to judge definitely. The impact of these was to imply potentially a shift from the older Maoist legacy and to the newer Dengist one. In reality, however, the overlap



between the status-quo ex-ante and later developments in human resources was as yet only partial. Even so, the ‘iron rice bowl’ now appeared to be on the wane in all the enterprises visited, but this may be misleading as there is a great degree of inertia in the system, and Western managers interested in setting up a venture in China should be as flexible as possible Vis-h-Vis the need to adapt to both Chinese legal requirements as well as practical exigencies. In a joint venture, as we have seen above, there is an organisatiod inheritance to tackle, although they may be better advised to set up on a ‘green-field’ site and be wholly- owned, which may give them greater degrees of freedom. As far as the 1994 Labour Law is concerned, we may conclude that it is only a preliminary

form of regulation in a vast country with various local interests to be considered, and that given the problems of enforcement of such legislation, its real impact should not be over-estimated; in the long-term, local protectionism and the difficulties in establishing trade unions autonomous of the employer - but not of the state and workers - will be two crucial problems to be faced in carrying it out. To a large extent, the phasing out of the ’iron rice bowl’ - expressed by the new Labour Law - does not seem likely to occur overnight, due to financial and institutional problems, as well as an inefficient factory inspectorate. While the goal of such legal reforms is to maintain and develop harmonious management-labour relations (thus cementing social stability), labour disputes, for example, cannot be legislated away that easily and are likely to remain a key issue in an emergent ’socialist market economy‘ in the post-Dengist era, at least for the foreseeable future.

Acknowledgement The field work reported in this paper is based on research in Beijing which was sponsored by the British Co uncil exchange scheme, whose generous support is appreciated. I must further acknowledge the contribution of colleagues at Tsinghua University who acted as interpreters and translators during the visits to enterprises.

This article is a substantially revised and extended version of a paper originally presented to an international conference on ‘Cross-cultural management in China’ held at Hong Kong Baptist University, 26-28 August 1996.

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