Managing Employment Relationship in China

September 14, 2016

China has moved from a closed, centrally planned economic system to a moremarket-oriented since the late 1970s and became the second largest economy after the US with the biggest labour force in the world. As a socialist country with the legacy of the state planned economy embedded in the country’s political and economic system, the role of the Chinese government in various sectors has remained dominant. This essay aims to analyse the role of the state in the management of the employment relationship as well as its future role in the development of this systemin China. Characteristics of employment relations in China are now diverging across different ownership forms, industrial sectors and groups of workers. Due to the poor representation by unions as well as employer’s associations, employment relations in China are shaped largely between the employer and workers, with the majority of workers having little bargaining power.

The role of state is crucial in shaping employment relations through the enactment of laws and regulations. However, employers seem to find ways to bypass legal constraints and workers tolerate unlawful employment practices for fear of job losses.To some extent, the employment relations are influenced by the Chinese traditional culture that emphasises social cohesion and stresses the importance of social values over individual interests, cooperation over conflict and trust over power. During its process of economic reform, the development of the labour market has undergone three stages. The first one is the highly regulatedlabour market during the state planned economy period. The second period of deregulation was between the 1980s and the early 2000s.The third period began in 2007, in which the government sought to re-regulate the labour market to provide greater employment protection to workers. Unions do not have much power and are generally ineffective in representing worker interests. The All-China Federation of Trade Unions (ACFTU) founded in 1925 is the only trade union recognised by the Chinese government, which served to provide support to the Party by mobilising workers.Union roles and responsibilities are set out by state laws which require them to safeguard interests of employees, employers, and actively participate in the economic development of the nation.At this stage unions took up two major functions: skill training and assisting laid-off workers to gain employment. Employer associations in China are not well established. The China Enterprise Confederation(CEC)which is only officially recognised by the stateplays a limited role in employment relations. The employer associations usually act on behalf of the state to implement government policy. In recent times, the lobbying power of Chinese employers is on the rise when private firms and FIEs are significant employers. Outside the state sector employment relations are mainly shaped at the enterprise level. In China the term ‘Collective Consultation’ is preferred by the state to collective bargaining as it conforms to the Chinese culture of non-confrontation and conflict avoidance. From 1995 onwards the unions were given the role of representing workers when consulting with employers and signing collective contractswithout any direct involvement of workers or any real negotiation process. The role of state as an employer, legislator and economic manager is dominant.This is despite the fact that there is only a shrinking population employed in the state sector in recent times.The private sector has been encouraged to grow through the removal of policy restrictions and operational barriers, together with the provision of financial incentives.Once marginalised in the state-planned economy due to the ideological clash between capitalism and socialism, the private sector now holds a major stake in the economy.There are a number of important labour laws in China: Labour Law of China in 1995, Labour Market Wage Rate Guideline(1999), Special Regulation on Minimum Wage (2004) and Amended Trade Union Law (2001). Three major pieces of legislation were passed in 2007, including Labour Contract Law, Employment Promotion Law, Labour Disputes Mediation and Arbitration Law. A unique feature of the Chinese laws and regulations is that central government provides the broad framework. It is up to the local governments to devise their localised regulations to suit local characteristics, based on these master prints.However, the decentralisation of interpretation and enforcement opens up opportunities for implementation slippage.Further the existing body of employment regulations primarily targets those in the formal sector. There is considerable ambiguity about whether many of these laws apply to those in the informal sector – Employers take advantage of these legal loopholes and argue for exemption.While the labour laws carry more legal power, they provide limited regulations on the labour market. Where changes in employment practices are taking place, there are often a result of the enactment of employment related laws and regulations. The role of the state

therefore continues to be crucial in shaping employment relations in the foreseeable future. Chinese system of employment relations might face a number of current and future issues. The rapid expansion of the informal employment sector was primarily resulted from cost saving (from the employers’ perspective) and creation of employment opportunities (from the governments’). Employees in this sector are exploited in many ways. Next, there has been a significant growth in the number of employment agencies catering to the lower end of the labour market. Although these benefited both the worker and the client, agencies have been criticised for their money making motive. The lack of work-life balance is also becoming an issue in the managerial and professional jobs leading to health and retention problems, e.g. long working hours without higher rates of pay. To some extents, there are a number of differences between the management of the employment relationship in a newly industrialised market economy such as China and that in other developed market economies. Western approaches to employment relations is a value system founded on the concepts of democracy and pluralism, a `balance of power' between the two social partners, and minimal State intervention. Such resolution is left mainly to the two social partners through bipartite mechanisms, primarily the instrument of collective bargaining. Differently, governments' determination of the economic direction of newly industrialised countries was a critical factor in shaping the employment relations systems. Collective bargaining and freedom of association is not as widespread and encouraged by state in newly industrialised countries as in the developed countries. Moreover, Western governments did not, unlike some newly industrialised ones, `create' unions. Another distinction could be suggested by reference to the reactions to industrial conflict. Western societies recognise industrial conflict as a natural consequence of a failure to reconcile conflicting interests on fundamental matters such as wages. In newly industrialised countries, governments and employers seem to prevent or curtail strikes. In conclusion, employment relations in China have undergone significant changes during its process of economic reform. As a socialist country with the legacy of the state planned economy embedded in the country’s political and economic system, the role of the Chinese government in the management of employment relations has remained dominant. It can be forecasted that the
state will continue to play a central role in the foreseeable future.

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