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From the 1980s onwards, however, there are some indications that promotion is increasingly being based on ability (Mee-kau Nyaw, 1995). Finally, the role of the Chinese trade unions - in the form of the All China Federation of Trade Unions (ACFTU) - in management-labour relations is also changing. In China, the trade unions play a supportive rather than an adversarial role. The unions have not been bargaining freely or negotiating wage levels, as is normally the case in western countries. The ACFTU was assigned two functions: top-down transmission, mobilization 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 (the nominally representative workplace mechanism of the ACFTU). In reality, however, the Workers' Congresses themselves had no power to make decisions that were binding on the factory director. Hence managerial authority, together with the power of the party committees, prevailed over others in enterprise management. In the everyday work of the enterprise, union officials were expected to look after the ongoing welfare needs of their members (Warner, 1997). With much greater emphasis now being placed on economic efficiency, the status of the trade union in the enterprise hierarchy is expected to improve, leading to a more active form of worker participation (Mee-Kay Nyaw, 1995). In reality, however, the government is frightened that at some point the ACFTU will, 'break up into independent unions that might actually speak up for the workers' (The Economist, 'Getting organized, with western help', 29 November 2001). Questions (All questions carry marks as mentioned ) 1. Compare the changes in features of the Chinese human resource management system with the Anglo-Saxon and Japanese systems. What are the differences and similarities? (10) 2. In what way can the changes help to increase productivity in the SOEs? What would you recommend as further changes that are feasible in view of the societal features? (10) 3. How would you link the changes that have happened in the Chinese human resource system to Chinese societal and historical features? (10) 4. What does the case tell you about the change in the education of works and staff, and how will this affect the organization structure in the SOEs? What would the organizational structure have been before the changes and why? (20)

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Since the mid-1980s, Chinese enterprises have slowly begun to abandon the lifetime employment part of the system. After 1986, Chinese enterprises introduced fixed-period labour contracts for new employees. The 1994 labour law extended the phasing-out of the entire system to a wide range of SOEs. However, until the mid-1990s, layoffs of redundant workers were uncommon as there was strong "unofficial' opposition from the state security unit for fear of social unrest if workers were thrown out of their jobs. From the late 1990s, in those parts of the country where the state economy weighs heaviest, such as Changchun, in China's industrial north-east, being laid off has become a daily threat. Moreover, the city governments in this part of China also announced an end to subsidized housing (The Economist, 'No job, no house, no welfare', 28 May 1998). 'China is trying to set up a social-security system to take over the welfare role once played by the enterprises' (The Economist, 'Urban discontent", 13 June 2002). As indicated, the "iron rice bowl' in state enterprises had co-existed with an egalitarian wage payment system involving a flat reward structure for much of the time. Basic wages were low and fixed according to national scales, and incentive bonuses were developed at plant level but within limits again set by the government. Both wages and bonuses were unrelated to the performance of enterprises. Moreover, lack of proper job evaluation meant that wage levels were more or less arbitrarily determined by state bureaucrats for all Chinese SOEs (Mee-Kay Nyaw. 1995). Recognition of the arbitrariness of the wage system, and of the fact that its overwhelmingly egalitarian nature seriously reduced the initiative and motivation of good workers, resulted in the national abandonment of the old wage grade system. From the mid-1990s onwards, the new "post plus skills' (gangji gonzi chi) system, with age, position and skill determining the basic wage. has been widely adopted (Warner, 1997). Moreover, the government also lifted the bonus limits to give enterprise management the ability to reward the good and diligent, and to punish the unproductive. This ought to enhance the motivation of workers and technical staff, but in order to have any effect income differences must increase. For a long time the promotion system in Chinese SOEs has been based on the seniority of workers and staff rather than on performance. In addition, Guangxi (or 'connections") is another major factor in determining who should be promoted. Workers and staff with special ties to the superiors in power, either through family connections or via the formation of special cliques, usually get promoted over others lacking these connections. These types of malpractice have denied many capable workers and staff the chance of promotion to higher ranks. Furthermore, a manager can also be said to be "sitting on an iron chair' while enjoying an iron rice bowl' (i.e. he can be promoted to senior ranks but cannot be demoted regardless of capability or performance). This has resulted in a phenomenon where there are too many high-ranking officials with too few rank-and-file staff, and there is overstaffing with too few staff actually performing work. Since the end of the 1970s, governmental reform programmes have tried to rectify such practices. However, there are a number of obstacles that make it difficult to implement change: 1. low wage makes senior management staff unwilling to step down from their positions, as to do so would imply that they would lose many privileges 2. the lack of a rigorous performance appraisal system 3. the lack of regulation that can be implemented and enforced.

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Case: How does China carry out HRM? There are great changes taking place in China, not only in the macroeconomic sphere, but also at enterprise level. The reforms introduced in the 1980s set the scene, but in the 1990s management- labour relations, employment and human resources moved closer to external models. In September 1997, in particular, approval of the faster reform of state enterprises by the Chinese Communist Party seemed to play a major role in the change process (The Economist, 'No job, no house, no welfare', 28 May 1998). Nevertheless, in some ways, institutional and organizational inertia continues to hamper the shift from the older practices, especially in the larger state-owned enterprises (SOEs). What has emerged has been called "human resource management with Chinese characteristics' (Warner, 1997: 41). Indeed, the imperfect or partial transformation from the old to a newer system of management-labour relations is evidence of specificity rather than universalism. Until the second half of the 1970s, the Chinese Ministry of Labour exercised tight control over labour allocation. Workers and staff were assigned to particular jobs in a unit for life by the local labour bureau, with an overall quota set by the Ministry of Labour. Neither workers nor enterprises had any say in the allocation process but had to accept whatever jobs or manpower were given. The recruitment function was practically non-existent in a state enterprise. This system resulted in the mismatching of talents and jobs, and a misallocation of labour resources in SOEs. Moreover, as a result, there was no labour market to speak of in China. From the end of the 1970s, however, the labour control system loosened up somewhat. The reforms in the 1980s and 1990s introduced further change visa-vis past hiring practices and meant a shift from central allocation to marketization of the labour force, with the emergence of a nascent labour market. The legacy of the past cannot easily be dispensed with, however. The quality of China's labour force is significantly lower than that of other industrialized countries. Recognizing the importance of worker education and industrial training, the reform programmes launched from 1979 onwards emphasized training for technical staff. However, training for management has been carried out with equal vigour. It has been recognized that training a core of managers is the key to successful implementation of the nation's modernization programmes. This view is in great contrast to that of the Cultural Revolution years (1966-76), during which management as a subject of study was abolished by the 35 institutions that offered a programme modelled after the Soviet Union. Nowadays, managers are trained both by the enterprises themselves, as well as by universities and finance/economics colleges. Management courses place a strong emphasis on quantitative methods such as production engineering, operations research, and statistics. Qualitative courses such as human resource management, marketing, and skill development, on the other hand, are rather weak (Mee-Kau Nyaw, 1995). A linchpin of the state-owned industrial sector was China's "iron rice bowl' employment system, which promised job security and cradle-to-grave welfare coverage. Aside from job security, and egalitarian but low wages and limited bonuses, the system provided workers with heavily subsidized services such as low-cost housing. food and transportation, free medical treatment, retirement pensions, childcare, and so on. This practice of a low basic wage with many subsidies is unique to China - a paradox that has yet to be resolved. Indeed, this social support system drains substantial resources from the enterprises, and over the years has become a great burden on them (Mee-Kau Nyaw, 1995).

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