Reforming Labor Relations in China's
State-Owned Enterprises: The Impact
of Balancing Measures*
J
OSEPHY. S. C
HENG A NDQ
IL
IThis article concentrates on the period 1992-99, when the Chinese government carried out its second round of economic reforms. Balancing measures are the focus of this study of labor relations in state-owned enterprises (SOEs). The analysis covers three interconnected areas. The first is policy analysis, summarizing the reform and balancing measures, as well as tracing the interaction of both types of policies in the course of gradual reform, examining the impact that these balancing measures have had on the social and political functions of SOEs. The second is an ex-amination of the influence of the restored social and political functions on internal labor relations in SOEs. The third discusses the emerging division of interests between labor and management in SOEs. This article is based on empirical findings in eight SOEs in Beijing and Zhangjiakou city, Hebei province. The authors conducted interviews with workers, managers, and the cadres of unions at these SOEs in the summer of 1998 and underwent participant observation in one of these SOEs for three weeks in the summer
©Institute of International Relations, N ational Che ngchi University, Taipei, Taiw an (RO C). Joseph Y. S. Cheng (鄭宇碩) is Professor of Political Science at the Contemporary China Research Center, City U niversity of Hong K ong, and is the founding editor of the Hong Kong
Journal of Social Science s. Professor Cheng can be rea ched at <rcccrc@cityu.edu.hk>.
Qi Li (李琪) taught at the Capital University of Economics and Business in Beijing. He re-ceived his Ph.D. from the D epartment of Public and Social Administration, City Unive rsity of Hong Kong, and is now engaged in research at the department.
*The authors w ould like to thank Dr. Bill Taylor of the Public and Social Administration De-partment, City University of Hong K ong, for his ideas and assistance in the re search w ork re lating to this article.
of 1999. Although these SOEs differed in size, at the time when the authors' fieldwork was carried out, there were no changes in their ownership situ-ation (such as selling off the enterprises or establishing joint ventures), nor in their operational style (such as leasing or subcontracting). Hence, the data collected from these SOEs depict the transition of labor relations in SOEs with "primitive" conditions during the process of reform.
KEYWORDS: labor relations; balancing measures; identitie s of both work-ers and management; authority of management; integration of objectives and demands.
* * *
The term "balancing measures" in this article can be defined as various kinds of measures adopted to maintain political stability in the reform process. In the narrow sense as applied to labor reforms, this term refers to policy measures formulated to strengthen the appeal of the official ideology, to limit the power of state-owned enterprise (SOE) management, and to compensate for the economic losses of workers, so as to partially restore the social and political functions of SOEs.
This article begins with a discussion of the historical background of the labor reforms in China's SOEs in the 1990s. Then it examines the major balancing measures adopted in the SOEs in this period, including their con-ceptualization and emergence, and analyzes the influence of such measures on labor relations in the SOEs, with a special focus on the identities of both workers and management (as well as the authority of the latter). The inte-gration of the objectives and demands on the part of labor and management is then considered.
The interviews were mainly conducted in seven SOEs in Beijing
(北京) and Zhangjiakou (張家口), Hebei province (河北省).1
In these SOEs, six managers, twenty-seven workers, and six cadres of trade unions were interviewed, providing information as to the respective effects of reforms on themselves and their relationships. Other interviews were also
1A list of interviewee s ha s be en included in the manuscript submitted to the journa l; it is
conducted, including the officials in the supervisory authorities of these SOEs, cadres in the relevant government agencies, and concerned scholars. In addition to the interviews, a period of participant observation, two "focus group workshops," and a systematic survey of the trade unions concerned were also conducted to gain supplementary data.
Historical Background
Since the end of 1978, China's economic reforms in the urban areas have been focusing on SOEs, seeking to change their operational mech-anisms so that they may first become more responsive to demand and, at a later stage, turn into market-oriented economic entities responsible for their own management decisions, profits, and losses. The reforms have strengthened the economic functions of SOEs and granted more opera-tional autonomy to their management. Enterprises in turn have demanded significant changes of the hitherto centralized system of labor allocation, job security, wages, and social insurance.2
In the first stage of SOE reform (1979-84), the government adopted the general policy of "decentralizing authority and transferring profits" (放權 讓利, fangquan rangli). The second stage of reforms (1984-86) focused on "strengthening the vitality of SOEs" (增強國有企業活力); the important innovations included further decentralization of power to SOEs, streamlining of government control, reform of the taxation system, and the implementation of the enterprise director (manager) responsibility system (廠長責任制). Since 1987, SOE reform entered the third stage with the focus on "rebuilding their operational mechanisms" (重建企業經營機制). The fundamental orientation was the introduction of various kinds of responsibility systems, including the contract responsibility system (承包 責任制) for large and medium-sized SOEs, leasing of small SOEs, and the
2See, for example, Olivia K. M. Ip, "Changing Employment Syste m in China: Some
Evi-dence from the Shenzhen Special Economic Zone," Work, Em ployment and Society 9, no. 2 (June 1995): 269-85.
experimentation with the joint-stock shareholding system (股份制).3
Reform of the labor system went hand in hand with those of the SOEs. In 1979, some measures were introduced to reduce the direct administrative control over labor allocation; in 1984, productivity-based remuneration schemes were implemented. In 1986, a labor contract system (勞動合同 制) replaced permanent employment (鐵飯碗, or the "iron rice bowl"); at the same time, labor dispute mediation and arbitration systems were estab-lished, and national social insurance systems were developed to take over the previous enterprise-based ones. In 1994, limitations on the employ-ment of rural labor in cities and towns were relaxed.4
These labor reforms in SOEs, like those of SOEs themselves mentioned above, were designed to strengthen the economic functions of SOEs, while eroding their political and social roles, so as to enable SOEs to become market-oriented.
The respective status of managers and workers was re-defined. In the first place, the implementation of the labor contract system meant a transi-tion of labor relatransi-tions from being "administrative" to "contractual" in na-ture.5
Furthermore, the labor reforms have gradually made SOE managers independent actors in providing employment (用工主體, yonggong zhuti) on the basis of laws and regulations.6
They have secured greater autonomy
3Lin Yifu, Cai Fang, and Li Zhou, Zhongguo de qiji (China's miracle) (Hong K ong: The
Chinese U niversity Press, 1995), 119-26.
4Wang Shengsheng et al., Guoqi gaige ershinian (The reform of state-owned enterprises in
the pa st twenty ye ars) (Beijing: Zhongguo shenji chubanshe, 1998), 81-86; Gao Shusheng,
Zhongguo jiuye tizhi gaige ershinian (The reform of the employment system in China in the
past twe nty ye ars) (Zhengzhou, Henan: Zhongzhou guji chubanshe, 1998).
5Daniel Z. D ing and Malcolm Warner, "'Re-inventing' China's Industrial Relations at
Enter-prise Level: A n Empirical Field-Study in Four Major Cities," Industrial Relations Journal 30, no. 3 (September 1999): 243-60; Jiangw ei Han and Motohiro Morishima, "Labour Sys-tem Reform in China and Its Unexpected Consequences," Economic and Industrial D
emoc-racy 13 (1992): 233-61; Solomon M. Karmel, "The Neo-authoritarian Dilemma and the
Labor Force: Control and Bankruptcy vs. Freedom and Insta bility," Journal of
Contempo-rary China 5, no. 12 (1996): 111-33; and Q i Zhirong and Xu Xiaohou, Zhongguo laodong guanxi daolun (A n introduction to labor relations in China) (Hangz hou: Zhejiang renmin
chubanshe, 1995), 70-71.
6Chang Kai, "Laoquan baozhang" (Safeguard of labor rights), in Laodong guanxi,
laodong-zhe, laoquan: Dangdai Zhongguo de laodong wenti (Labor rela tions, laborers, and labor
rights: Labor Issues in contemporary China), ed. Cha ng Kai et al. (Beijing: Zhongguo lao-dong chubanshe, 1995), 41-76; Qi and Xu, Zhongguo laolao-dong guanxi daolun, 44-45; and
in the recruitment and dismissal of workers. The government's promotion of the establishment of a modern enterprise system since 1993 has further strengthened SOEs as legal and economic entities with even greater au-tonomy in their operations. In this process, the former united interests between managers and workers have been eroded and a divergence of interests between the two has clearly emerged.7
These labor reforms have had a serious impact on SOE workers. Workers have been suffering from a decline in social status, a weakening of job security, expanding wage disparities, worsening workforce differentiation, segmentation, and stratifi-cation, and, in the case of unprofitable enterprises, reduced wages.8
In the context of the division of interests between workers and managers, the for-mer increasingly become aware that their personal interests and incomes have been endangered.9
As relatively free agents seeking employment, workers recognize such freedom means the ability to search for better jobs and higher incomes, yet also brings risks of unemployment (失業, shiye).10
Many thus expect that frictions and conflicts between workers and man-agers will be inevitable, and labor relations in SOEs will deteriorate.11
Wang Aiw en, Shehui laodong guanxi: Yanbian guocheng de kaocha yu fenx i (Social la bor relations: A n examination and analysis of its evolutionary process) (Beijing: Hongqi chubanshe, 1993), 38-39.
7Jiang Ruxiang, "Fenhua yu zhenghe: Zhongguo shehui we ndingxing yanjiu" (Division
and integration: An analysis of sta bility in Chinese society), Minzu jingji y u shehui
fa-zhan (National Economy and Social Development), 1996, no. 2:10-13; Q i and Xu, Zhongguo laodong guanxi daolun, 52; A ndrew G . Walder, "Workers, Mana gers, and the
State: The Reform Era and the Political Crisis of 1989," The China Quarterly, no. 127 (September 1991): 467-92; Yunqiu Zhang, "An Interme diary: The Chinese Perce ption of Trade Unions since the 1980s," Journal of Conte mporary China 6, no. 14 (1997): 139-52; and Ying Zhu, "Major Changes Under Wa y in China's Industrial Relations,"
In-ternational Labour Review 134, no. 1 (1995): 37-49.
8Karmel, "The Neo-authoritarian Dilemma and the Labour Force," 111-33; Greg O'Leary,
"The Making of the Chinese Working Class," in Adjusting to Capitalism: Chinese Workers
and the State, ed. Greg O'Leary (Armonk, N.Y.: M.E. Sharpe, 1998), 48-74.
9Qi and Xu, Zhongguo laodong guanxi daolun, 51; and Walder, "Workers, Managers, and
the State."
10Chang, "Laoquan baozhang."
11Wenfang Tang, William L. Parish, and Tongqing Feng, "Chinese Labor Relations in a
Changing Work Environment"; Wang, Shehui laodong guanxi, 90-92; and Andrew G. Walder, "Factory and M anager in an Era of Reform," The China Quarterly, no. 118 (June 1989): 242-64.
Labor reforms have basically altered the economic structure and transformed the interest relationships within SOEs, and thereby adversely affect social stability in China. As reforms advance the interests of some groups and damage those of others, social conflicts naturally emerge. These conflicts in turn have hampered the further progress of reforms, and are perceived to threaten the stability of the Chinese Communist regime. One argument is that the imbalance of economic interests and the relaxa-tion of political controls in SOEs were major causes for worker participa-tion in the political movement in the summer of 1989. The Tiananmen Incident (天 安門 事件) therefore forced the Chinese Communist Party (CCP) leadership to review the potential threat that reforms might pose to the regime. A series of policy measures to "improve the economic en-vironment and rectify the economic order" (改善經濟環境整頓經濟秩序) were introduced,12
and the reform movement lost its momentum.
Deng Xiaoping's (鄧 小 平) tour of southern China in early 1992 provided the impetus for a new round of reforms. As part of the process of these market-oriented reforms, dramatic changes have been taking place in labor relations in China, including the retreat of government dominance, the withdrawal of enterprise paternalism, the enhancement of managerial autonomy, the separation between workers and management, the decline in worker status, the segmentation of workers, and the changes in the role and functions of trade unions. In SOEs, however, labor relations have still retained many unchanged characteristics.
The labor relations in this context present a complex picture that is hard to be explained and understood by prevalent Western theories. Aca-demics study labor relations in China from many perspectives, including political, sociological, legal, and economic viewpoints. A common starting point in these studies is the reform measures and, therefore, a common point implied in their different conclusions is that they have examined the changing labor relations in China. The differences in their conclusions are
12Wu G uoguang, Zhulu shiwuda: Zhongguo quanli qiju (Toward the 15th party congress:
usually in regard to the pace, depth, and orientation of change.
Since the SOEs before the reform era were treated as independent units (單位, danwei),13
their social functions might be interpreted as a wall between SOEs and society, providing shelter for those working in SOEs. This wall has been gradually destroyed by economic reforms, which have been "pushing SOEs to the market"; thus SOE workers have become ex-posed to the vagaries of the market. Balancing measures are attempts to repair this wall, and are guided by the two principles of satisfaction and compensation. The first principle refers to measures aimed at satisfying the economic needs of those whose interests have been compromised; the second covers those aimed at compensating the losses of those whose economic needs cannot be satisfied. Further deepening of the economic reforms, however, implies that the balancing measures will not be sus-tainable.
Balancing Measures
Conceptualization and Emergence
In reforms in China, the phenomenon of "two steps forward, one step backward" is common. The reasons are several. In the first place, forging a consensus is difficult in China. In the general absence of channels of interest articulation for the powerless, disagreement with and opposition to reforms are often expressed subsequently in various forms of passive resistance and refusal to cooperate. This is often the stage where the lead-ership begins to respond to the grievances by offering compensatory meas-ures. Furthermore, in view of the diverse conditions throughout China, serious adjustments may have to be made in the process of implementation. Sometimes the leadership may have been overambitious in setting the tar-gets of reform too. Finally, the reform process has to be responsive to the changing political, economic, and social conditions; hence "one step
back-13Lu Feng, "D anwei: Yizhong teshu de she hui zuzhi" (Unit: A special form of social
ward" may be the best strategy when adverse conditions are encountered. The process of economic reforms in China since 1979 has been a tran-sition in which the planned economy is being transformed into a market economy. Some economists in China have used the "distribution of re-wards" approach to analyze and explain this process.14
Many have argued that the conflicts among different interest groups and the compromises reached on the basis of their relative strengths determine the nature of the systematic arrangements. Furthermore, analysis of the distribution of re-wards and the conflicts of interest offers measures of the cost of reforms. As the cost of reforms is related to the conflicts of interests, promotion of reforms can be facilitated both by reducing the number of people who will be adversely affected by the reforms and by offering compensation to those whose interests have been damaged by the reforms.
Non-fixed Terms of Labor Contracts
Job security is a precondition for workers in SOEs to enjoy various types of social insurance and benefits. Threats to job security brought about by the reforms have been the main source of worker discontent. Hence balancing measures have had to focus on providing better job secu-rity to workers in SOEs.
In the process of implementing the comprehensive labor contract system, the central government allowed the elderly workers in SOEs to avoid signing fixed-term labor contracts with their management. This was reaffirmed by the Labor Law (勞動法) of July 1994, which states: "In case a laborer has been working in the same unit of employment for ten years and more, and the parties involved agree to extend the term of the labor contract, a labor contract with a non-fixed term shall be concluded between them if the laborer so requests" (Art. 20). To reduce the resistance in im-plementing the comprehensive labor contract system, local governments
14For a brief survey of the literature, see Sheng Hong, chapter 1: "The Study of the
Transi-tional Economy in China," in Zhongguo de guodu jingjixue (The study of the transiTransi-tional economy in China), ed. Sheng H ong (Shanghai: Shanghai sanlian shudian and Shanghai renmin c hubanshe, 1994), 1-20.
usually offered further policy stipulations in favor of workers in SOEs.15
Restricting Layoffs
Overstaffing or hidden unemployment is not a new problem in China's SOEs in recent years. Since an effective social insurance system has not been established in most parts of the country, managers of SOEs dare not dismiss workers easily due to their concern for social stability. For SOEs facing such serious financial difficulties that layoffs became un-avoidable, a complex application procedure had to be followed. In ac-cordance with the "Provisions on Reducing Personnel Due to Economic Reasons in Enterprises," issued by the Ministry of Labor on November 14, 1994, an SOE on the brink of bankruptcy may engage in reduction of its personnel when a people's court declares that the SOE has entered into a period of statutory consolidation, or when the SOE runs into serious dif-ficulties in production and management. After personnel reduction has been deemed necessary, management is still required to go through several procedures, including explaining the situation to the grass-roots union or all of its staff and workers thirty days in advance, providing a plan of person-nel reduction, soliciting opinions about the plan from the trade union or all of its staff and workers, and reporting the plan to the local labor admin-istrative department. These procedures effectively restrain managers from an easy resort to the use of layoffs.
Re-employment Project and Re-employment Service Centers
Since 1993, when reform policies had made impossible the require-ment that SOE managerequire-ment continue employing their surplus workers, the central government launched a re-employment project (再就業工程) to
15For insta nce, in the "Deta iled Rule s on the Implementation of the La bor Contract System,"
the central government removed the limitations on "keeping workers in the same unit of employment" and "extending the term of contract." This policy, in reality, allowed workers with more than ten years' seniority (usually the permanent workers) to continue to enjoy job security after signing a la bor contract. See Beijing Municipal Labor Bureau, Laodong
zhengce fagui huibian (Collection of labor policies and regulations) (Unpublished, 1995),
serve the dismissed workers. The Ministry of Labor announced that the central government, by implementing the re-employment project, aimed to promote the enthusiasm of local governments, enterprises, laborers, and other societal groups, to adopt policies supporting employment, and to devise instruments to offer employment services.16
Wu Bangguo (吳邦國), a vice-premier, stated the aim of the re-employment project behind this official statement as follows: "to give jobs to surplus workers in order to prevent them from demonstrating in the street."17
Maintaining social sta-bility was therefore the primary motivation of launching the re-employ-ment project.
From 1997 onwards, the central government has been aware that reducing overstaffing is the most important means of increasing SOE eco-nomic efficiency and, thus, has adopted a policy calling for "increasing efficiency by downsizing staff" (減員增效). At the same time, Chinese leaders understand that the increasing number of dismissed workers would be a threat to political stability.18
They have thus strengthened administra-tive measures associated with the re-employment project in order to prevent layoffs from becoming a significant source of social unrest. In May 1998, the CCP Central Committee and the State Council held a work conference on guaranteeing a basic living standard for dismissed workers and implementing the re-employment project. In the document released after the meeting, the central government promoted the emulation of the Shanghai method— setting up re-employment service centers for dismissed workers.1 9 However, different from the Shanghai experience, these centers
16Wang Jianxin et al., Zhongguo laodong nianjian: 1995-1996 (China labor yearbook:
1995-96) (Beijing: Zhongguo laodong chubanshe, 1996), 208.
17Wu Bangguo, "Directives on Labor Work," ibid., 14-15.
18A document issued by the CCP Central Committee in 1997 reported that, in comparison
with the sa me period in 1996, in the first quarter of 1997 the number of events where laid-off workers took to the streets and made trouble inc reased 10 perc ent. The Central Com-mittee regarded laid-off workers as the major fac tor of social instability in the long-term future. See Wang Haitao, "Time-Bomb Threatening Social Stability: An In-depth Perspe c-tive of the Crisis of 30 M illion Laid-off Workers," Kaifang (Open Magaz ine) (Hong Kong), no. 138 (June 1998): 17-19.
19In 1996, the Shanghai municipal gove rnment adopted a new measure in the carrying out of
have to be set up within the SOEs with dismissed workers. In this way, the principle of "internal settlement within the enterprises" (企業內部安置) has been maintained.
Restoring the Role of the Party in SOEs
In the wake of the Tiananmen Incident, the Chinese leadership began to enhance the Party's role in SOEs once more. On August 28, 1989, the Politburo of the CCP Central Committee issued a "Circular on Strength-ening Party Building," which assigned the grass-roots Party organs in SOEs the role of the "political core."20
The "Resolution on Several Important Issues Concerning the Strengthening of Party Building," endorsed by the fourth plenum of the CCP's Fourteenth Central Committee on September 28, 1994, marked a further enhancement of the status of Party organs in SOEs. According to this document, grass-roots Party organs are required to carefully consider the strengthening of their participation in the deci-sion-making process, as well as of their supervisory abilities in order to guarantee the implementation of the guiding principles and policies of the Party and state.21
This requirement has basically re-established the authority of the grass-roots Party organs in SOEs to intervene in the latter's decision-making process.
of re-employment se rvice centers. The centers w ere required to be set up by the super-vising agencies of SO Es (now most of these agencies had been changed into group cor-porations or holding companies). These centers w ere responsible for managing xiagang workers, guaranteeing their essential living expenses, and helping them to secure re-employment. According to this measure, the surplus personnel in SOEs must be la id off first and then moved to the centers. After the former w orkers enter the ce nters, their former enterprise s are to still maintain nominal employment relationships with them. Funding for the re-employme nt service centers was to be shared by the government, community, and enterprise s; these monies were earmarked for xiagang workers' essential living expenses, da ily out-patient expenses, and social insura nce expenses. The gist of this measure w as to make use of the service centers sponsored by the supervising agencies of SOEs as a transi-tional arrangement in order to facilitate the laying off of surplus personnel.
20Liu Guoguang and Zhou Guiying, Zhongguo jingji gaige quanshu (1978-1991): G ongye
qiye juan (Complete works on China's economic reforms, 1978-91: Volume on industrial
enterprise s) (Da lian, Liaoning: Dalian renmin chubanshe, 1992), 573.
21For further details, see the General O ffice of the Coordinating G roup for Strengthening the
Building of Lea ding Bodies of SOEs, G uoyou qiye lingdao banzi kaohe jianshe gongzuo
zhidao (Directives on assessing and building the leading bodies of SOEs) (Beijing: Da
On January 24, 1997, the CCP Central Committee issued a "Notice Regarding Strengthening and Improving Party Building in SOEs," in which the status of the grass-roots Party organs as the "political core" was further raised to that of "political leadership," signifying that the Party's role would be to guide and coordinate the exercise of power in a complex organiza-tional structure (including Party committees, workers' congresses, meetings of shareholders, boards of directors, and supervisory boards) in SOEs.22
In this document, perhaps more importantly, the CCP Central Committee re-emphasized the principle of "the Party controlling cadres" (黨管幹部), declaring that "the Party committee is empowered to nominate the didates of middle-level and senior managerial personnel," and "the can-didates should accept the investigation of the Organization and Personnel departments of Party organs and pass the group discussions of Party com-mittees before appointment by the director." Along this line, even though the Party organ's status has not been restored to the extent that the Party secretary is the "primary figure," this new change is enough to limit the power of the director.
Reinforcing the "Master Status" of Workers
In order to minimize worker dissatisfaction, the Party has attempted to re-emphasize the "master status" of workers in SOEs, and to that end has introduced the slogan "wholeheartedly relying on the working class" (全心 全意依靠工人階級). On July 25, 1989, one month after the Tiananmen Incident, Jiang Zemin (江澤民) allegedly stated that the working class is the main force in socialist construction, and building the "Four Moderniza-tions" should rely on the working class wholeheartedly. Furthermore, he added the following two slogans— "Party organs assuming the role of the political core" and "adhering to the factory director responsibility system" — to the previous one as the three crucial principles in establishing a modern enterprise system.23
The "wholeheartedly relying on the working
22Renmin ribao (People's D aily), March 11, 1997. 23See note 20 above.
class" slogan was subsequently adapted by the CCP Central Committee into the four requirements to be fulfilled by the government and SOE managers: ensuring the "master status" of workers and staff members, strengthening democratic management and democratic supervision, strengthening the building of worker corps, and safeguarding the legitimate interests of workers and staff members.24
Denying the Employer-Employee
Relationship between Managers and Workers
To reduce further worker resentment against the labor contract sys-tem, the CCP Central Committee Propaganda Department, the Ministry of Labor, and the All-China Federation of Trade Unions (ACFTU, 中華全國 總工會) jointly issued an "Outline of Propaganda on Reforming the Labor, Wage, and Social Insurance Systems" on April 18, 1992, in which the em-ployer-employee relationship generated by labor contracts was denied.25
The Outline states: "The labor contract between laborers and directors does not mean that directors are 'employers' and workers are 'employees'," be-cause the contract is based on the socialist public ownership of the means of production, and cannot change the nature of public ownership and the principle of distribution according to one's work." Workers are still the "masters of the means of production" in SOEs. The labor contracts signed between workers/staff members and directors define the labor relationship between the respective individuals and the enterprises. The directors still serve as representatives of their enterprises as well as representatives of laborers collectively. Both parties therefore have the same interests and objectives; there is no exploiter-exploited relationship based on "hiring." Furthermore, the central government promised in this Propaganda Outline that, in the course of implementing labor contracts, enterprises will, in
ac-24Wei Jia nxing, "A Speech at the Seventh Presidium Meeting of the Twelfth National
Con-gress of the ACFTU," Zhongguo gongyun (China Labor Movement), 1995, no. 2:7.
25Departme nt of Policy and Law, Ministry of La bor, Laodong zhengce fagui huibian
(Col-lection of labor policies and regulations) (Beijing: Zhongguo laodong chubanshe, 1993), 520-48.
cordance with the needs of production, sign long-term contracts or non-fixed-term contracts with most workers and staff members.
In a highly centralized society like China, even small changes may lead to societal unrest because of the high degree of interaction among the parties concerned. In this case, minimizing the potential of a crisis is a prominent consideration in the Chinese leadership's policymaking agenda.26
In the course of reforms, the main reason for unrest in urban areas has been worker dissatisfaction arising from the weakening of the social functions of SOEs in the reform period. For the purpose of maintaining political sta-bility and defusing challenges to the Chinese Communist regime, Chinese leaders therefore, while deepening reforms in SOEs, have adopted balanc-ing measures in the political, administrative, and economic areas. Not sur-prisingly, the course of SOE reform reveals a contradictory picture: on the one hand, the central government continually weakens SOEs' sociopolitical functions via the reform measures; on the other hand, through balancing measures, the government also constantly restores these functions. It seems, however, that the latter kind of measures cannot effectively stop the development of unrest in society because the reform process has actually given rise to a series of social shocks, and the impact of balancing measures in maintaining social stability is limited. In the meantime, these balancing measures have been delaying the progress of, as well as reducing the social shocks brought about by, reforms. Both types of effects continue to impose their profound influence on labor relations.
The Identities of Both Workers and Management
In this and the following sections of this article, the authors will use the data collected from eight SOEs to analyze the influence of balancing
26Task Force for Social Structural Transition, "Zhongguo shehui jiegou zhuanxing de jinqi
yu zhongqi qushi he weiji" (The trends a nd hidden trouble s in the structural transition of Chinese socie ty in the short and mid-terms), Zhanlue yu guanli (Strategy and Manage-ment), 1998, no. 5:1-17.
measures on labor relations. Although differing in size, a common feature among these SOEs was that, until the time of the completion of the authors' fieldwork, there were no changes in their property rights (such as selling all or part of the enterprise to another party or forming a joint venture with another party), nor in their operational style (such as leasing or subcontract-ing). Hence, the data collected in the fieldwork reflect the transformation of labor relations in SOEs under "primitive" conditions in the process of reform.
In the neo-traditional system, workers and managers in SOEs gained their respective identities through state ascription.27
The state, via a series of institutional arrangements, granted different social status and economic resources to different societal groups. In the Chinese social structure before the reform era, this was the common means of gaining social identity.28
The government exercised its administrative power and granted the man-agers of SOEs the identity of "cadres" by which the manman-agers became qualified to control the internal material resources of the enterprises. At the same time, the government granted workers the identity of "masters of the state" and, by implication, "masters" within their respective enterprises. This abstract concept carried considerable economic significance. The term implied that once a laborer was recruited by an SOE, he or she would be entitled to various economic benefits provided by the enterprise, in-cluding job security and welfare.29
By implementing the labor contract system, the government re-introduced the recruitment and deployment of workers in SOEs according to the mode of the market economy. Theoretically, instead of defining the rights and obligations of workers and management in terms of administra-tive arrangements, they are now defined in terms of market transactions.
27Andrew G. Walder, Comm unist Neo-traditionalism : Work and Authority in Chinese
Indus-try (Berkeley, Ca lif.: U niversity of California Press, 1986), 11.
28Li Lulu and Wang Fe nyu, Dangdai Zhongguo xiandaihua jincheng zhong de shehui jiegou
jiqi biange (The social structure and changes in the process of modernization in c
ontem-porary China) (Hangzhou: Zhejiang renmin chubanshe, 1992), 83-103.
The identities, status, and remuneration of both management and workers are then stipulated by contract provisions. On the one hand, managers, es-pecially senior managers, become the party who employs workers, deriving their authority over workers from labor contracts, even though they are still perceived as agents of the ultimate owner of SOEs and the state. On the other hand, workers have become "wage-workers" and form a party em-ployed by managers. They have to fulfill the tasks assigned to them by managers in order to earn their wages and benefits. In general, each party has to respect the other party's rights and obligations as defined by contract. The implementation of the labor contract system and related reform meas-ures, as expected, encountered severe resistance from workers. After the breaking of their "iron rice bowl," workers questioned whether or not they were still the true "masters" of their SOEs. The government, as mentioned earlier, had adopted a series of balancing measures to reduce worker dis-satisfaction. These measures have exerted considerable influence on the transition toward a new labor-management relationship in two areas.
The first influence comes from the reiteration of the "masters" identi-ty of workers. This reiteration, in actual effect, is no different from granting the social status to workers and defining their interests by administrative acts. Although most workers doubt the effectiveness of these balancing measures in recovering their original status, the reinforcement of the "masters" status of workers affects their subconsciousness. The workers continue to believe that the logical basis of their job security and welfare benefits from SOEs remains unchanged after their signing of the labor con-tracts. The following statement given by the deputy director of a printing factory helps to illustrate this subconscious belief (interviewee 18/5/98/B):
We [our factory] had a warehouse outside the factory and sent four workers to guard it. Last year, because it had been empty for a long time, we rented this warehouse to another company. As a result, these four workers lost their work-posts. If they were willing to quit, a monthly living allowance of 200 yuan would be guaranteed. However, the worke rs figured that the a mount was too low and applied to return to the factory. The fact was, because there w ere more surplus workers within the factory, it was difficult for us to accommodate them. I asked them to do the cleaning work tha t had been done by some temporary workers before. I told them that if they agre ed to my suggestion, I would dis-miss the temporary workers immediately. D o you know w hat they said? The y said: "We have not made mistakes, why do you ask us to be cle aners? "
In the opinion of some directors, the workers have learned how to protect their own interests by adopting different identities in different cases as suits their needs. The vice-president of a printing company raised some cases of this phenomenon (interviewee 8/5/98/A):
There is no doubt that the "ma ster" is just an empty conce pt. In reality, they can decide nothing at all. But this doesn't mean that they have forgotte n the "mas-ter" concept. In my opinion, workers will adjust their identities in ac cordance with their needs. For example, there wa s a machine plant in my company. We [the company] rented the site to another company several years ago because the plant had been losing money for many years. We a dopted various ways to ac-commodate the workers. For the older workers approaching retirement age, we grante d them "internal re tirement." However, these workers did not want to go home. They said that, when they started working in that factory, they had given themselves to the Party and become masters of that factory. They asked: "Why didn't you ask our opinions before renting out our factory? " They therefore per-ceived their identity from the perspective of the nature of ownership. Some-times, in light of the market perspective, they would forget their "masters" identity when required to show up. For instance, sometimes overtime w ork was required when the plant received urgent orde rs from external traders. At that time the workers considere d the ir incomes from the perspe ctive of being "hired hands."
The second influence of the balancing measures on labor relations in SOEs is the inhibitions imposed on the "hired relationship" which should have been developed on the basis of the labor contract system. In fact, with the implementation of the balancing measures, the group distinction be-tween senior managers who employ laborers and workers who are em-ployed has become ambiguous. Hence, the contradictions between re-form policies and balancing measures have bewildered both managers and workers over their respective status and identity.
For management, the reform policies have defined the relationship between the state and SOEs. The latter, as autonomous legal entities, possess full power over their assets and are independent economic organ-izations. The directors, being the representatives of these legal entities as entrusted by the state, exercise the authority of management in terms of employing laborers, organizing production processes, determining wage systems, and so on. On the other hand, various balancing measures re-peatedly emphasize their responsibility to represent and safeguard workers' interests. The demands of "dual representatives" make their identity as
"employers" ambiguous. While they sometimes complain that they do not know whom they are representing, the directors usually feel uncomfortable identifying themselves as "employers." Some workers contacted by the authors perceived their directors as "good directors." The criterion of "good" they used was that the directors "place themselves in a correct position; that is, they don't show any distinction from us as workers" (inter-viewee 24/6/98/C).
From the perspective of the workers, the contradictory administrative measures have led to their ambiguous evaluations of the "hired" relation-ship. On the one hand, reform policies— such as enhancing management authority, abolishing job security, and leaving internal distribution to be de-termined by management— have made workers realize that there has been a "hired" relationship between them and management, and they are paid wages in exchange for their labor. On the other hand, influenced by the balancing measures such as reinforcing the "masters" status, non-fixed-term labor contract, and the like, workers deny or reject the existence of an employer-employee relationship. When the interviewees were asked the question of whether there was a "hired" relationship between workers and management, of the twenty-three workers who answered the question, fourteen denied its existence, five said "yes," and four replied "hard to say" or "no idea."
Workers who denied the existence of a "hired" relationship justified their position in three ways. First, they thought that workers had the same interests and identities as managers because both were employed by the state and lived on wages. In this way, workers rather had a "hired" rela-tionship with the state (interviewees 8/6/98/C and 19/6/98/E). Second, in the opinion of some workers, there was no "hired" relationship because the economic and political systems had not changed completely, and SOEs as well as their trade unions were still controlled by the Party. The renqing (人情, or human bonds and sentiments) and the ganqing (感情, or human feelings and friendship) still existed among workers and managers, and there were not many differences when compared with before. The workers believed that in their factories, everything was done according to the rules, and these rules had binding force on management behavior (interviewees
8/6/98/D and 25/6/98/C). Third, some workers took the view that public ownership of the means of production implied that SOEs were not private factories belonging to the directors; hence the "hired" relationship did not exist in SOEs (interviewee 22/6/98/C).
Among workers with a sense of being "hired," their understanding of the employer-employee relationship focused on the power of manage-ment in layoffs and terminating labor contracts. These workers related the "hired" relationship to the policy of "increasing efficiency by downsizing staff." They considered that because of the policy, they were under the control of managers who had the power to decide what to do and how to do it. Under the pressure of layoffs, workers felt they had to follow the orders of managers, because if their senior managers dismissed them, they simply could do nothing (interviewees 5/6/98/D, 22/6/98/E, and 6/6/98/A). A few workers interviewed perceived their "hired" relationship with their man-agers with considerable ambiguity. A worker explained why he found it difficult to determine if there existed a "hired" relationship (interviewee 7/7/99/D):
Today, I work, he [the director] pays. In this sense, the relationship between us is a "hired" one. However, if he dismisses me tomorrow, then he has to clearly explain why. In routine work, he has the final say; concerning this issue [dis-missal], he cannot do anything he likes. Anyway, for thirty years or more, I have be en w orking for the state, not for him. There is no w ay he c an dismiss me without any c ause. If this ever happens, I'll look for some places to say something.
Piecing these evaluations together reveals certain trends of thought taking shape among workers in recent years. In view of the clashes be-tween the two kinds of policies, worker yearning for recognition of their status does not necessarily involve a yearning for power. All evaluations, including those denying and affirming their "masters" status and the "hired" relationship, suggest that workers do not have great aspirations to power, which is different from the Cultural Revolution period when they were said to be the "leading class." Their understanding of the "masters" status and "hired" relationship may be illustrated by the following state-ments: "We are defined as the masters of enterprises and of course we have the right to demand job security; if there is no job security, there will be a
'hired relationship'" (interviewee 9/7/99/F).
The Authority of Management
This fieldwork identifies a non-institutional restraint stemming from the balancing measures which removes almost all management discretion in worker dismissals and layoffs— the basic authority in personnel manage-ment. All managers contacted by the authors complained that it was hard for them to exercise their authority to dismiss and lay off workers. The di-rector of a factory losing money explained his dilemma during these years as follows (interviewee 22/6/98/A):
The nature of SOEs determines that the directors have to keep one eye on pro-duction and another on politics. So the directors have to share the ir responsi-bilities with the government. Now the government stresse s maintaining stabili-ty. The le aders in city hall always ask us to prevent workers from bringing their complaints to the gove rnment offices. If I dismiss a worke r, his interests would be damaged. Under such circumstances, he will surely complain to the govern-ment offic es, and the w ithdrawal of my dec ision either by myself or by my su-perior agency may be the final re sult. If this is the reality, I am better off not taking such a decision.
The managers in SOEs often expressed their dissatisfaction and helplessness concerning non-institutional restraints resulting from the bal-ancing measures. In the fieldwork sites visited by the authors, some senior managers admitted that overstaffing was serious in their enterprises and "laying off one-third or more of the workers would not affect normal pro-duction" (interviewee 23/6/98/B). However, the managers did not have the actual authority to lay off workers because their superior agencies did not allow them to do so. When the central government initiated the policy of "increasing efficiency by downsizing staff," SOE managers were confronted with a new dilemma: on the one hand, they were pushed by their superior agencies to reduce the number of workers; on the other hand, they were required by the same agencies to accommodate the surplus workers within their enterprises or send them to the "re-employment service centers."
The restraint on dismissing and laying off workers generated further difficulty for SOE managers in exercising their authority autonomously. The director of a workshop in Qi Li's participant observation factory took the view that economic and administrative sanctions other than dismissal and discharge had much less effect than before the reforms (interviewee 4/7/99/A):
Now every SOE has its complete discipline system. However, the managers have found it difficult to enforce these rules. In fact, to the worker w ho violates the rules, w hat we can apply are ec onomic and administrative sanctions. The effect of the former is limited because every month, according to the labor reg-ulations, the fine must not be more than 20 percent of the worker's monthly wage. Sometimes, the loss caused by the worker could not be compensated by his fine.
Among the workers interviewed by the authors, some also held the view that their managers had few effective means to enforce labor disci-pline. A worker, who was sent to work in a printing factory (with Hong Kong investors) as a technical advisor from 1993 to 1995, compared the situation with his previous factory experience in Shenzhen (深圳) (inter-viewee 14/7/99/E):
If I had the opportunity to se lect my employment unit again, an SOE would be my first choice. [Why?] One of the reasons is its slack management. There are perfect w orking rules in SOEs like our factory, but w ho really follows these rules and who oversees the implementa tion of these rules? In our factory, we can have a seat when machines are operating. In the fa ctory with Hong Kong investors, the workers had to stand during the entire working period. You see, there is a bed beside my machine [in fact, a pie ce of w ooden board on two boxes — authors' note], I can have a nap after lunch. In a foreign-invested factory, this would be just a dream. Yesterday there w as something wrong with my machine and I failed to find the electricia n. He was finally found by our director at the mahjong table in a storehouse. In a foreign-invested factory, people like the electrician would definitely be dismissed; but in this case, what he got was several critical statements from the director. I have been in this factory for tw enty years; I cannot recall anyone being dismissed by the director, except several people who had be en se ntenced by the courts.
While the authority of managers to dismiss and lay off workers has been restrained to some extent, the government, via its balancing measures, safeguards the interests of workers and reduces their dissatisfaction in the course of reform. In this connection, worker sense of dependence, which
comes from the traditional system, has been reinforced by the balancing measures. In other words, under the impact of these measures, workers have placed their hope of safeguarding their own interests in the govern-ment.
Integration of Objectives and Demands of Both Parties in SOEs
Some scholars consider that the framework of united interests be-tween workers and management has been destroyed by the economic and labor reforms.30
They argue that after acquiring the authority and economic responsibilities, managers of SOEs can now define their management ob-jectives based on economic considerations, such as reducing the cost of production, eliminating losses, increasing profits, expanding the market shares for their products, and so on.31
In view of the impact of the reforms on their former interests, workers have become more concerned about the protection of their interests including job security, wages, and welfare and benefits.32
The data collected by the authors in this fieldwork, however, show a more complex picture.
A Framework of Competing Objectives for SOE Managers
In today's China, the government has already designed a framework of competing objectives for managers of SOEs. The government requires them to enhance efficiency as an economic objective, and also asks them to retain the traditional social functions of SOEs that maintain social stability, which is a sociopolitical objective.
30Jiang Ruxiang, "Fenhua yu zhenghe"; Qi and Xu, Zhongguo laodong guanxi daolun, 50;
and Zhang, "An Intermediary."
31Theodore Groves et al., "China's Evolving Manage rial Labour M arket," Journal of
Po-litical Economy 103, no. 4 (August 1995): 873-91; and Tang, Parish, and Feng, "Chinese
Labor Relations in a Changing Work Environment."
32Qi and Xu, Zhongguo laodong guanxi daolun, 51; and Zhao Jianjie, "The Situation and
Spe cial Features of Labor Re lations in SOEs," in Chang et al., Laodong guanxi,
The political and social objectives, imposed in the form of govern-ment policy, are often taken as "political tasks" and, therefore, their fulfill-ment constitutes a political criterion in the evaluation of SOE managers. A set of criteria defined by the Beijing municipal government in 1997 pro-vides an illustration.33
Among the ten groups of indicators given in the table, some political indicators (such as "implementing the principles and policies of superior agencies, meeting Comrade Jiang Zemin's require-ments that leading cadres should have political awareness, strengthening leading-body-building ideologically and politically, and ensuring the im-plementation of political policies") are ranked as being top priority.
These political criteria make every economic benefit provided by SOE managers tainted with political connotations. Motivations of manage-ment behavior, including the paymanage-ment of wages and social insurance fees for workers, are perceived not solely for the economic interests of workers, but are also based on political considerations. Among the authors' contacts for this fieldwork, several managers interviewed revealed that, after the 1989 Tiananmen Incident, local governments constantly paid more at-tention to the role of SOEs in maintaining social stability (interviewees 22/6/98/A, 23/6/98/B, and PAR-A). They informed the authors that on the eve of some "politically sensitive" occasions such as the Spring Festival (Chinese New Year), the "two meetings" (the annual sessions of the Na-tional People's Congress and the Chinese People's Political Consultative Conference),34
"June Fourth" (Tiananmen Incident anniversary), and Na-tional Day, governments at all levels or their superiors would convene meetings to relay the directives from above. At these meetings, the direc-tors of SOEs were typically required to minimize labor disputes as best as they could; hence they had to avoid dismissals and layoffs, prevent any de-lay in paying wages and pensions, and resolve labor disputes within their
33The document was issued by the Beijing Municipal Economic and Trade Commission in
1997, and w as given to the authors during their fieldwork.
34The "two meetings" are usually held in March every year, shortly after the Spring Festival.
These meetings attract much domestic and international media attention, and are occasions when the deputies and delegates from the provinces may articulate the ir local grievances.
factories as soon as possible. In general, they had to do their best to prevent workers from naoshi (鬧事, or making trouble) on these occasions (inter-viewees 22/6/98/A and PAR-A).
This framework of competing objectives is related to the dual evalu-ation system of management performance. Until the time of the authors' fieldwork, most SOE managers were still directly appointed by their su-perior authorities or appointed by these authorities after election by their staff and workers.35
In this context, the governments concerned had the authority to evaluate their performance in accomplishing the economic and sociopolitical objectives according to a dual evaluation system.
Under this system, an assessment mechanism was set up along the administrative lines of the superior authorities, e.g., industrial bureaus at different levels. The directors of SOEs were to be regularly evaluated by officials from superior agencies— usually yearly, but sometimes semian-nually— to assess their performance in accomplishing the competing objec-tives. This practice was instituted when the CCP came to power in 1949 and had changed little even in the 1990s.
Another practice was "democratic appraisal" (民主評議). According to this practice, the activities and achievements of managers were to be evaluated by workers and staff members (or their representatives). The Chinese leadership in fact reinforced this practice through a "Notice on Strengthening the Evaluation and Building of Leading Bodies in SOEs," issued by the Organization Department of the CCP Central Committee, the State Economic and Trade Commission, the Ministry of Personnel, and the ACFTU on March 3, 1997. This document stipulated that the performance of the directors in SOEs would be assessed by a range of criteria related to their political duties as well as their economic objectives.
Apart from regular evaluations conducted by workers or their
repre-35A 1996 survey among Chine se entrepreneurs found that 71.3 percent of the directors of
SOEs were still appointed by their supervisory agencies. See Survey System of Chinese Entrepre neurs, "Zhongguo qiye jingyingzhe de zhiye liudong yu zhiye quxiang" (The cur-rent career mobility and career orientation of ma nagers in China), Jingji gongzuozhe xuexi
sentatives, workers could send their opinions directly to the superior agen-cies by way of writing letters or visits, without going through the formal ad-ministrative hierarchy. The superior agencies could also send their officials to the factories to listen to the opinions of the workers. These opinions, which were not related back to the managers, were highly valued by the superior agencies and were taken as one of the most crucial determinants in assessing the careers of senior managers. A director the authors inter-viewed observed that workers' opinions could, at least, have some effect on destroying his reputation among workers and staff members in his enter-prise, and even the confidence of his superior agencies in him (interviewee 22/6/98/A):
Have you heard of the saying that "eight cents can make you feel uncomfortable for ha lf a year" [八分錢讓你難過半年]?36 This is still the truth now. Their
opinions, if re ally serious, will provide an opportunity for the superior agency. If someone over there dislikes you, he will take this opportunity to give you a hard time or dismiss you from your post.
The framework of competing objectives, nevertheless, provided SOE managers with more opportunities to secure a positive evaluation even if their enterprises lost money, because both the superior authorities and sub-ordinate workers do not take economic efficiency as the sole criterion in the evaluation of their performance.
Managers in SOEs could gain a higher rating when evaluated by achieving political rather than economic objectives. This was often the favored option of most managers, especially when increasing economic efficiency within a short time proved difficult. In order to do well in the evaluation exercises, in most cases, managers would (not entirely from conscious design) accord the interests of workers and staff members a high priority. A shortcut to win over workers, if possible, was to satisfy their basic needs. Spending money on worker benefits would, at least, not in-volve any political risk. Thus, as depicted by Andrew Walder, "an
un-36This saying was w ide spread in the early 1980s when the cost of postage for domestic mail
was eight cents. It actually meant writing a letter of complaint about the manage rs to the supervisory agencies.
spoken agreement between management and workers" was created.37
The following strategies adopted by the managers of SOEs well illustrate this "unspoken agreement."
Continuing to provide job security for surplus workers: All senior managers interviewed by the authors admitted that there were surplus workers in their enterprises, totaling between 15 to 33 percent of the total workforce. However, these managers were reluctant to increase economic efficiency by laying off these surplus workers. One reason for inaction was given by a trade union chairperson from a manufacturing factory (inter-viewee 23/6/98/A):
At the last meeting of the workers' congress, a proposal to lay off surplus workers ac cording to seniority was rejected by our director. He took the view that our fa ctory is technology-oriented; w e w ould lose numerous technical workers if we acce pt the proposal. This then means a loss of productivity. So internal acc ommodation should be a characteristic of a socialist enterprise.
A director, whose factory had suspended production, explained as follows (interviewee 19/6/98/A):
My factory has suspended production for thre e years, and 80 percent of the workers have been staying at home. Until now, I have not laid anyone off, un-less someone resigned by themselves. [Why?] First, this factory will be in op-eration as soon a s it can secure circulating capital to buy raw materials. Under such circumstances, I need to keep a relatively stable labor force . Second, when staying home, the workers, ea rning a 150 yuan per month basic living allowance, can find some te mporary jobs in the labor market, and all the time have the hope of returning to the fac tory. So they will not go to the government offices to complain.
Continuing to pay various social security payments and benefits for workers: During the social security reform in the 1990s, workers' medical insurance and pensions were still covered by SOEs, which constituted a main part of enterprise expenses for laid-off workers. All senior managers interviewed by the authors admitted that their enterprises were saddled with the huge burdens of benefits and social security payments and lacked the power to cut costs. One director claimed, "In a medium-sized factory,
37Andrew G. Walder, "Wage Reform and the Web of Factory Interests," The China Quarterly ,
if there are several workers suffering from incurable diseases, making profits would become empty talk" (interviewee 9/7/99/A). Despite such complaints, however, managers in SOEs prefer that the benefits and social security payments remain unchanged in accordance with the government regulations. A manager who was in charge of a factory's personnel de-partment told the authors that her factory still covered the medical care expenses for more than one thousand retired workers. Although she com-plained that "they spend too much, the highest expenditure for a single person was more than 300,000 yuan in one year," she acknowledged that "the managers never hesitated paying medical expenses for retired workers; if they asked, the cheques would be written at any time" (interviewee 5/6/98/B). About 40 to 90 percent of workers and staff members in sites visited by the authors lived in housing provided by their enterprises; some of the interviewees told the authors that they had received apartments from their factories a few months prior in view of the coming reform of the hous-ing system.38
Increasing wages at rates exceeding the growth of labor productivity: In the transition process, SOE managers were driven by the desire to in-crease profits as well as to provide pay and benefits to workers.39
If fi-nances allowed, the usual practice was for managers to increase worker wage rates and benefits considerably, in order both to secure positive evalu-ations from the workers and to increase their own incomes. Among the five profit-making factories the authors visited, the growth of average an-nual wages from 1987 to 1997 exceeded the growth of labor productivity in four of them; a post office (a state monopoly) was the only exception.
38Since the ce ntral government introduced the reform policy of "housing allowa nce in pla ce
of actual housing allocation" on July 1, 1998, commercial property has become the main-stream form of housing available to urban residents. Several months before the implemen-tation of this policy, many SOEs, public-sector organizations, and government orga ns rapidly distribute d housing units to their e mploye es; and this became known as "taking the last bus of welfare housing" (搭福利分房的末班車).
39Li Peilin, "Qiye yanjiu de shijiao" (A perspective of enterprise studies), in Zhuanxing zhong
de Zhongguo qiye: Guoyou qiye zuzhi chuangxin lun (Chinese e nterprises in transition: A
theory of SO E organizational innovation), by Li Peilin et al. (Jina n: Shandong renmin chubanshe, 1992), 23.
During this period, the central government repeatedly issued documents demanding managers to keep the growth of total wage bills below that of labor productivity.
A "Reluctance to Leave SOEs"
After two decades of reform, there was no doubt that with the decline of the social and economic status of workers in SOEs, new laborers in ur-ban areas no longer regarded the industrial SOEs as desirable employment units. Some survey data and the results of the authors' fieldwork reveal, however, that in the minds of the incumbent workers, SOEs were still their preferred employment units. Among the twenty-seven interviewees an-swering the question "Supposing you were allowed to select your employ-ment unit by yourself, what kind of employemploy-ment unit would you most de-sire?" fifteen selected SOEs and five preferred government agencies. Even in the factories that were losing money or had suspended production, there were still four interviewees selecting SOEs and two government agencies. In their own words, the workers had "feelings" (感情) for their SOEs.
This "reluctance to leave SOEs" may be explained in several ways. Andrew Walder has, for instance, explained, from the perspective of eco-nomic dependence, why workers were unwilling to leave SOEs.40
How-ever, given that more than 60 percent of SOEs were losing money and were offering relatively low wages to their workers, there must have been other factors besides economic dependence. The authors' fieldwork reveals that the causes for the "reluctance to leave" were complex.
The government's policy of support and economic assistance for SOEs, in addition to the balancing measures, led workers to believe that the authorities would not "look on with folded arms" when their SOEs en-countered financial problems. This view was very popular in SOEs that were losing money or had suspended production. Such perceptions were constantly strengthened by the government's continual injection of "social stability money" into these enterprises.41
A worker in a factory that had
40Walder, Com munist Neo-traditionalism, 14-15.
suspended production explained why this belief led him to remain working for an SOE (interviewee 19/6/98/F):
If I w ere a llow ed to select my employment unit, an SOE would be my first choice because the state will eventually provide some a ssistance to SOEs when they are confronted with financial problems. Under such circumstances, I be-lie ve the problem w ill be resolved and the difficult period w ill not be long. For instance, our factory has suspended production for three years. If a state bank could give a loan to maintain the cash flow, this factory would ma ke a quick recovery.
The balancing measures remained an effective means to maintain a traditional management style in SOEs, which in turn led workers to believe that their interests would be better protected or, at least, would not be easily damaged. A worker who had worked in a foreign-invested enterprise several years before presented a case of his own experience as follows (interviewee 14/7/99/E):
Even though some SOEs lose money, manageme nt at least will put some em-phasis on "human rights." I was sent by our factory to a foreign-invested fac-tory as a technical advisor for two ye ars and I still remember an incident that occurred. This factory printed a batch of packing-boxes for a client in the United States. A portion of this batch was returned by the c lient because of quality defects. The Hong Kong boss scolded the director of the workshop an-grily and abusively. I w as present and felt that the boss w as not scolding his subordinate but his son. In SOEs, the director cannot scold their workers in this way.
Even after SOEs' managers had been granted more authority in deci-sion-making, the balancing measures still had a strong "path dependence" effect. It was difficult for managers to abandon their long-established managerial techniques and methods. A worker with thirty-two years of seniority explained his choice of SOE management style as follows (inter-viewee 22/6/98/E):
operation of re-employment service centers in SOEs. This amount increased to 99.06 bil-lion yuan in 1999. See Ministry of Labor and Social Security, 1998 nian laodong he shehui
baozhang shiye gongbao (Annual bulletin of the development of labor and social security
undertakings, 1998) and 1999 nian laodong he shehui baozhang shiye gongbao (Annual bulletin of the development of labor and social security undertakings, 1999) (Beijing: Min-istry of Labor and Social Security, 1999 a nd 2000).
I shall select an SOE if possible because I have been working in an SOE since the first day of my employment. I trust it. One of the advantages in this kind of enterprises is job security, unlike other types of enterprises [w here] workers are vulnerable to dismissal. Another advantage is the relatively normal man-ageme nt style. In these enterprises, our interests will not be damaged signifi-cantly even in a market economy. Furthermore, I am old and cannot adapt my-self to the intensive working conditions in foreign-invested enterprises.
Even some younger workers shared a similar view. A thirty-four-year-old worker said that (interviewee 15/7/99/F):
Technical w orkers like us can easily earn more in foreign-invested or private enterprises. However, one point should be kept in mind: these enterprises would not pay you more w ithout additional requirements. In other words, you have to pa y a higher price for this highe r wage. If the boss asks you to work overtime, you cannot turn him down. From the first minute you enter the work-shop, you cannot stop working for the entire day. Compared to this, I feel more comfortable and less tired working for an SOE.
"State debts" were also one of the reasons for worker "reluctance to leave SOEs." For about forty years, the central government had been adopting the strategy of "gaojiuye, digongzi" (高就業、低工資, or high employment, low salary).42
At the same time, the central government also promised workers benefits in the future, such as job security, medical ex-penses, housing, and a pension.43
While this pattern of commitments had changed during the reforms, workers in SOEs still consider that the state owes them certain "debts" which should not be cancelled by reform poli-cies. This perception has mainly prevailed among older workers. In their view, as long as they do not leave their SOEs, they would retain their right to ask the government to "repay their debts"; once leaving, this right would be given up. A worker further explained this view as follows (interviewee 14/7/99/E):
I had considered quitting this job. In this fa ctory, the most I can earn is about 1,700 yuan a month, but in other types of enterprises such a s private factories,
42Yang Yiyong, Jiuye lilun yu shiye zhili (Theories of employme nt and solutions to
unem-ployme nt) (Beijing: Zhongguo jingji chubanshe, 2000), 33.
43Li Peilin, "D ealing with U nemployment in Old Industrial Bases: Post-Industria lization and
Marketiza tion— A Survey of Nine Large-Scale SOEs in the Northeast," Shehuixue yanjiu (Studies of Sociology), 1998, no. 4:1-12.
