HRM, Work and Employment in China

Fang Lee Cooke

• Publisher: Routledge
• Year: 2004
• Print ISBN: 9780415327848
• eBook ISBN: 9781134336661
• Topic: Business
• Subtopic: Business General
• Index: Business

During recent years there has been a growing interest in the way patterns of employment relations are changing in China. This up-to-the-minute book reviews the policy and practice of human resource management, work and employment in China over the last fifty years at both the macro and micro level. It fills the gaps in existing literature by addressing a number of thematic issues:

• the growing inequality in employment
• public sector reform
• pay systems
• vocational training.

It explores, contemplates and reveals this dynamic subject through a combination of rigorous research and first-hand interviews with Chinese practitioners, and is a valuable resource for anyone with an interest in Chinese society, Asian studies, comparative studies, human resource management, international business and employment relations.

1 Introduction

Introduction

China has one of the largest labour forces in the world with a population of nearly 1.3 billion, over half of whom were in employment in 2002. About two-thirds of them are rural workers. China also has one of the highest labour participation rates in the world (over 80 per cent). As one of the largest exporting countries and the second largest beneficiary country of foreign direct investments (FDIs), China presents itself as one of the economically most important nations in the world. However, China’s increasing interdependence with the world economy has been achieved through a period of political, social and economic change over the past twenty-five years. A major implication of these profound changes is how employment is (re-)organized and work experienced by its 0.7 billion workers (see Tables 1.1 and 1.2). Indeed, the employment landscape has changed significantly over the past two decades in at least three major dimensions.

First, lay-offs and early retirement had been a standard feature for stateowned enterprise (SOE) employees from the mid-1990s to the early 2000s when millions of workers were laid off, many of them consequently becoming bewildered and unsuccessful job seekers. This radical downsizing was accompanied by a series of far-reaching reforms in personnel/human resource policies and practices in the state sector, with the erosion of job security and welfare provision and tightened performance management as the major outcomes. If changes at enterprise level during the first wave of SOE reforms in the mid- and late 1980s were limited, then the level of organizational change and innovation of management techniques since the mid-1990s was far more evident (Ding and Warner 1999). These institutional discontinuities brought to an end the organized dependence of the state workers on their employer (Walder 1986; Lee 1999), which was crucial for sustaining paternalism, and called for a new mode of managing employment relationships.

A second major change has been the rapid growth of the private sector with the emergence of diverse ownership forms, for example, multinational corporations (MNCs), international joint ventures (JVs), domestic private firms, private small and self-employed businesses, township and village enterprises (TVEs), and the privatization of state-owned enterprises. Whereas access to ‘good jobs’ (in MNCs and JVs) is available to younger, male, skilled and educated workers in the private sector, the majority of workers may be segregated along lines of gender, employment status, residence status and market capacity.

Table 1.1 Population and employment: 1985–2002 (end-of-year figure) (figures in 1,000 persons)

Table 1.2 Rural labour force by sector: 1978–2002 (end-of-year figure) (figures in 1,000 persons)

Third, continuing urbanization has attracted an influx of migrant rural workers to urban areas who overcrowd certain segments of the job markets with only restricted opportunities accessible to them. The vast majority remain overworked, poorly paid and under/unprotected. Despite their pivotal contribution to a burgeoning economy in China, these workers have very few labour rights, and where the rights exist, they tend not to be actively policed. Many rural migrant workers have little cultural or technical knowledge, and institutionalized discrimination and the less-than-sympathetic attitude from the labour authorities further constrain their opportunities for employment and job choices.

It is apparent that China’s opening up of its economy has had demonstrable effects on most sectors of its industrial economy, directly through the establishment of MNCs and JVs, and indirectly through the impact that competition and liberalization are having on SOEs and domestic private firms. While some workers are facing a greater level of employment insecurity and worsening terms and conditions, others are presented with wider occupational/career choices, job mobility and higher rewards for skill and performance level. Employers in general are encountering increasing pressure for quality, adaptability, and performance enhancement. This calls simultaneously for the need for labour protection and the introduction of new human resource management (HRM) techniques that provide better pay and greater career prospects, and intrinsic value to cope with these new demands. A key question is to what extent the state and employers are under pressure or have incentives to implement these policies which are essential to safeguard workers’ basic labour rights and to improve productivity.

The increasing presence of MNCs in China may on the one hand act as a driving force for disseminating ‘best practice’ of HRM, upgrading technology, raising productivity and labour standards, and helping China to make the transition to a higher value-added economy. Indeed, this positive impact of MNCs has been evident in recent trends of adoption by domestic Chinese firms of HR practices that are associated more with ‘Western practices’, or at least, represents a marked divergence from the traditional Chinese personnel practices (see Chapter 9). On the other hand, MNCs may have little interest in these tasks other than using China as a low-cost mass production base that can be replaced when its comparative advantage declines. China’s attraction to FDIs comes mainly from its favourable financial policy and the abundant supply of cheap and willing labour rather than a high-skilled base of its workforce. These investment attractions serve as a disincentive for a high commitment model of HR policy. Over the past two decades, about 60 per cent of the foreign investments in China have concentrated in the manufacturing industry relying on the intensive use of labour rather than technological sophistication. This investment pattern has, however, started to change and there is now an increasing level of investment in the high-tech sectors, such as telecommunications and electronics, where skilled and professional workers are the key assets in these industries.

While the state may face the dual burden of having to provide employment as well as employment protection for its workforce, local governments may come up with different solutions to labour problems or confused interpretations of the national regulatory framework. For governments and policy makers, there is a widely held assumption that employment under any conditions is the objective to be maximized. For many employers, any imposition of labour regulations may threaten their ability to survive, especially where there is limited scope for transferring the increased costs to prices. For many workers, any paid work, no matter how low the wage level may be or in what forms they are paid, is better than no work, given the lack of (adequate) social security provision for the majority of workers. The prospect of articulation of labour rights is further obscured by the weak, if it ever exists, voluntary collective bargaining system in China where trade union organization is legislatively under the command of the Communist Party.

Furthermore, organizations may have divergent notions as to what constitute appropriate employment/HRM practices for their immediate concerns. Where new HR initiatives have been adopted (e.g. performance management systems, employee share ownership schemes, and enterprise culture management initiatives), the degree of their success remains difficult to assess precisely.

The complexity of this employment environment and the proliferation of employment policies and practices have led to a growing interest in the way patterns of employment relations have changed in China in the past two decades or so. Studies reported in Western literature have drawn our attention to changes in employment relations in organizations of different forms of ownership, for example, state-owned enterprises, collectively owned enterprises (COEs), joint ventures and newly privatized firms. These studies (e.g. Morris et al. 2001; Cooke 2002; Taylor 2002) have in general highlighted the withdrawal of state intervention in employment relations at enterprise level and a trend towards greater diversity in and marketization of the employment relationships. These are taking place in parallel with the introduction of more statutory labour regulations, notably the Labour Law of China (1995), and the radical reforms of workplace welfare and social security provisions.

Another growing body of research literature is that of human resource management in China, often through micro empirical studies of state-owned enterprises, joint ventures, multinational corporations, and more recently but to a lesser extent, township and village enterprises. In particular, the HRM practices in MNCs and JVs have been studied quite extensively (e.g. Verburg 1996; Child et al. 1997; Goodall and Warner 1997; Bjorkman and Lu 1999b). A common finding in these studies is that there are significant differences between HRM practices in the home countries of the MNC and those in their operations in China. However, research findings show that foreign managers have gained increased control over HRM issues (Child 1994). In addition, HRM practices in domestic Chinese companies are reported to have changed considerably over the past two decades (Bjorkman and Lu 2001). A central focus in this body of literature has been the extent to which China has embraced HRM in the Western sense.

While these studies have made significant contributions to our understanding on issues related to human resource management, work and employment in contemporary China, there remain major issues which have not been sufficiently explored but are of growing importance if we are to have a more comprehensive understanding of China. For example, in what ways do patterns of employment policies and practices differ among different ownership forms? What are the major reform initiatives in the state sector including SOEs, governmental organizations and public sector organizations? Are recent HR policies of the state sector having any noticeable impact on workforce behaviour? Given the well-documented state control in the determination of wage structure and level in the state sector, do its grassroots employees have any role in shaping the distribution outcome? Relatedly, given the well-known Chinese egalitarian culture, to what extent are employees receptive to new pay initiatives aimed at differentiating and motivating their performance? What types of training interventions are in place at both macro and micro level to address the long-existing skill shortage problems of China? Given the long-term state pledge on gender equality and the high proportion of women in full-time employment in China, are Chinese women faring better than their counterparts in other countries in terms of their employment conditions and career prospects? More broadly, who are the major disadvantaged groups of workers in the labour market and in what ways are they being disadvantaged? What are the state interventions to eliminate inequalities in the system and how effective are these interventions? What are the employment terms and conditions and other HRM practices in the private small business sector where managerial skills of the (owner-) employers may be relatively low and where state intervention may be deliberately weak and the workers the least protected? On a brighter note, what are the major challenges of HRM in China in general and what are the new HR practices favoured by organizations? What is the role of MNCs and JVs in disseminating Western HR practices in China? And are there any signs of convergence of HR practices within China and towards Western practices? This book aims to address some of these questions by exploring a number of thematic issues as follows.

Choice of themes and organization of the book

Employers’ labour/HR strategies are intricately linked with the institutional context, including the labour and product market and the regulatory framework, under which they operate. The examination of HRM practices at both the organizational and societal level in a developing country like China where the institutional context is rapidly changing therefore needs to be situated in a broader context of how work is experienced and employment opportunities structured. As Rubery and Grimshaw (2003: 5) observe, ‘In each society there are different ways of organising employment, reflecting the various institutional arrangements in place to generate skills, regulate the employment relationship and shape the wage structure’. Similarly, Boxall and Purcell (2003: 111–12) argue that the social and technical organization of work is ‘a fundamental building block in HRM’ because it has a most profound influence on people’s experience of employment, including the level of skill and training required, job satisfaction derived, motivation to perform, and opportunities to participate in decision making.

The topics selected for discussion in this book reflect the most significant developments that have taken place in China in employment and work in the past two decades. In particular, they are selected for one of three reasons. First, where important changes have taken place, for example, the restructuring of employment and HR policies in the state sector. Second, where ‘new’ developments of HRM have taken place, for example, performance management system, employee share ownership schemes, and enterprise culture management. There are two dimensions to these ‘new’ HR aspects. One is that these issues may not really be ‘new’ to HR practices in China, but may have gained ‘renewed’ interest in recent years. The other is that they are relatively ‘new’ in the time span of the past five decades. Third, they are important issues that have received little attention in the existing literature, for example, private small businesses, groups of workers who are peripheral in the labour market, and gender issues. Some of these issues may have long existed while others are (temporary) outcomes of recent changes.

Consequently, this book is organized both by sector and theme. This is because, first, there are the sector-specific changes which affect the way human resources are managed (e.g. the state sector), and the growth of new sectors (e.g. private small businesses), the characteristics of which directly shape the employment practices in these sectors and influence how work is experienced by its workers. This gives rise to Chapter 3 and Chapter 8 in which sector-specific issues in HRM and employment relationships are discussed. Second, certain key aspects and problems of HRM are shared by many organizations both in the state and private sectors, such as skill shortages, training, pay and recent developments in HRM. This gives rise to Chapters 4, 5 and 9 in which these thematic issues are explored. Third, certain groups of workers (e.g. female workers, laid-off workers and rural migrant workers) face barriers in employment that are specific to them, often to their disadvantage (e.g. gender inequality and low pay). This gives rise to Chapters 6 and 7 in which the unpromising employment and career prospects for these workers are analysed.

There is also a temporal dimension to the sequence of the chapters in which the first half of the book deals with issues that have existed for a long time and focuses on the role of the state as the major employer and as a legislator. The second half of the book contemplates the more recent phenomena including issues of inequality in employment practices outside the state sector despite the existence of employment regulations. This is in the context of the downsizing of the state sector, reduced direct intervention from the state, and the increase of employment-related legislation. While the earlier chapters feature organizations which have a relatively long history (e.g. state-owned), later chapters focus more on organizations in relatively new forms of ownership as a result of China’s political and economic reform since the late 1970s (e.g. small and private businesses, TVEs).

It must be pointed out here that this arrangement is by no means a clearcut divide. While some of the themes form chapters of their own, others run through several chapters in the book. For example, public sector reforms, vocational and enterprise training systems, pay systems, and employment in the informal sector are discussed in individual chapters, whereas other themes, such as workers’ representation, inequality in the workplace and labour market, and recruitment, feature, in various depth, in several chapters covering different sectors.

Considerable attention is paid to two main themes in the discussion. One is the role of employment regulations in the shaping of human resource management and employment practices. Regulations and administrative policies examined here include, for example, that of equal opportunity, the Labour Law, minimum wage and skill training. Employment regulations receive considerable attention in this book because the existence and effectiveness of employment regulations in a country is an important indication of a government’s commitment to safeguard the minimum level of labour rights of its labour force. Regulations play an important role in an employment environment such as that of China where incentives may be low for employers to invest in their HRM in order to elicit effort and commitment from their workers, and therefore, without a certain level of regulation to guarantee the minimum standards of labour, at least in theory, employers may be heading for a ‘race to the bottom’.

The other is the related theme of growing inequality in employment and HR policies in China. There are two strands to this theme. One is to do with gender inequality in employment and management. While full-time employment for women in China has been the norm for the past five decades, this apparent equality is quantitative rather than qualitative, with the majority of women clustered at the lower end of the job ladder. Women encounter increasingly blatant discrimination in recruitment, pay, promotion and retirement. Some of these discriminations are institutionalized in legislation whereas others are embedded in the culture. As Lee (1999) points out, despite the constitutional prescription for gender equality, national statistics and empirical evidence clearly reveal the prevalence of gender segregation and gender wage gaps. This conforms to the universal pattern in which women are segregated into occupations that are lower paid, largely labour-intensive and less prestigious. The degree of gender and wage inequality is a result of the institutional structures of China, as it is for other countries, that guide wage determination, education level, skill development, job allocation and career prospects at both societal and organizational level. The other strand examines employment inequality from a different angle, between (urban) workers in the formal sector and those in the informal sector (many of whom are rural migrant or laid-off workers). Whereas the former generally enjoy much better employment terms and conditions, the quality of work and employment protection for the latter are inferior by far. Yet this group is making up an increasingly large proportion of the workforce in China as a result of recent changes, an emerging employment pattern which also coincides with the international trend of informalization of employment and employment relations.

One deliberate omission from this book is a specific chapter on trade unions and workers’ representation. This omission is mainly to do with the fact that much has been written on the subject (e.g. Hoffman 1981; Warner 1990b; White 1996; Levine 1997; Ng and Warner 1998; You 1998; Ding and Warner 1999; Sheehan 1999; Chan 2001; Cooke 2002). These studies have provided a comprehensive and similar picture of the state of affairs of trade unionism in China. Given the existing body of knowledge on the subject and the absence of major developments in the role of trade unions in China, it was decided that the finite space would be given to other topics that have been less fully explored. None the less, issues related to trade unions and workers’ representation are discussed in various chapters where appropriate, often through the revelation of the lack of involvement and impact of the trade unions and the absence of alternative mechanisms of workers’ representation. For example, Chapter 2 outlines briefly the role of the trade unions in China in general; Chapter 8 draws our attention to workers’ apathy towards unionism and alternative official channels of resolving labour– management disputes; and the role of the trade unions in the future is discussed briefly in the concluding chapter (Chapter 10).

Another intentional omission is a chapter on HRM in MNCs and JVs for the similar reason that it is a relatively well-researched area, with many of the existing empirical studies on HRM in China drawn from these types of organizations. However, the characteristics of HR practices of these firms and the role of MNCs and JVs in influencing HR practices in China are discussed in various chapters as part of the wider picture of employment policies and practices in China.

In short, the book is organized with the view that, to understand patterns of adoption of HRM in China, it is necessary to contemplate its broader context of work and employment systems from a historical perspective, especially the legislative role of the state in a nation in which control tends to be centralized but enforcement of law is paradoxically weak. However, given the extent of change experienced in China and the complexity of the employment environment, it is difficult to embrace the breadth of the topics without losing a level of depth, a situation compounded by the gaps in available information. Based on the rationale outlined above, the chapters are organized as follows.

This introductory chapter provides a rationale for the book in terms of its importance, relevance and timeliness for a number of thematic issues chosen for discussion. It also lays out the structure of the book and provides a brief summary of the tasks of each chapter. Sources of statistics and empirical data used in this book are described, in addition to a brief explanation of the conceptual framework used for the book.

Chapter 2 outlines the broad characteristics of employment relations of different ownership forms, namely that of the state sector, MNCs and JVs, domestic private firms, and TVEs. Major differences in the employment/ HRM policies and practices between these firms are highlighted in view of the political environment under which different ownership forms emerged in China’s economy. Characteristics of the labour market and the framework of employment regulations are also discussed. The chapter then draws our attention to issues related to the increasingly inadequate mechanisms of workers’ representation and the rising incidence of labour disputes in the recent period of radical changes. This chapter provides the broad context under which more detailed discussions are carried out in subsequent chapters.

Chapter 3 explores a number of issues related to the reforms in the state sector. For example, what are the major sources of pressure for state sector reform in China? What approaches has the state adopted to introduce the changes into each of its sectors and what are the sources of conflict and resistance, if any, from the workforce? To what extent is China’s state employer embracing the notion of HRM that is becoming increasingly popular in the country? What are the major HR problems encountered by the state employer? What HR initiatives are implemented...

Table of contents

• Cover Page
• Title Page
• Copyright Page
• Tables
• Acknowledgements
• Abbreviations
• 1 Introduction
• 2 Employment relations in China and its institutional context
• 3 Reforms of the personnel system in the state sector
• 4 Pay systems and recent remuneration schemes
• 5 Vocational and enterprise training systems
• 6 Gender equality policy and practice in employment and management
• 7 Minimum wage and implications for equality in employment
• 8 Employment relations in private small firms
• 9 HRM in China – recent developments
• 10 The future prospects of HRM, work and employment in China
• Bibliography