Employment Relations in China: Impact of Cultural Factors and Statutory Regulations

This presentation explores the impact of cultural factors and statutory regulations on employment relations in China. It covers the labor laws, vocational education, and corporate governance in China. The presentation also discusses the role of unions and the importance of good industrial relations in improving economic performance.

Employment Relations
in Asia
A Case of China

Executive Summary
China is a communist party-led state with its capital city in Beijing. Its administration is divided into three; Sheng (23 provinces),
Zizhiqu (5 autonomous regions), and Shi (4 municipalities). The Establishment of People’s Republic of China was on 1St October
1949. Its legal system is such that the civil law systems for the soviet and continental European influences its own; statutes
interpretation power is retained by the legislature. In 2017, the passing of the General Provisions for China’s Civil Law by the
National People’s Congress was the first step in the adoption of the new civil code. The executive branch consist of President XI
Jinping and his Vice president WANG Quishan. The head of government include; Premier LI Keqiang, HAN Zheng the Executive
vice Premiers, SUN Chunlan, LIU He, and HU Chunhua. The Judicial branch has highest court(s) and Subordinate Courts.
Over the years, the economy of China has undergone many reforms that has shaped its today’s economic state. The most significant
reform was the shifting from the closed and centrally planned system to market oriented system in late 1970s. It has become one of
the largest global trader and has restrictions to support its key sectors. For this reason, it’s one of the largest exporters but it has
restrictions on importations. China has a population of more than 1.3 billion, with more than half of them living in the urban areas.
The economic growth for this economy has been high. Its unemployment rate has been low at an average of 4% but this has been
criticized as it doesn’t include the 270 million immigrants who live in China. This economy creates millions of jobs annually but not
sufficient for there are 8 million fresh graduates every year.
Employee relationship in China is impacted by factors such as guanxi where networking is considered more important,
Confucianism where people from certain social class are considered superior, and humanism where the use of force in the workplace
is criticized. The China’s statutory clearly states the rights of the employees and the role of business owners and other shareholders; it
explains their contractual relationship obligations. Good industrial relations is noted to improve economic performance; the federation
of trade unions is centralized and the state is in support of state owned enterprises. Inter-firm relationship is where businesses learn
from each other and create good relationship. China has realized the importance of vocational education and is on constant
development. Businesses in China are expected to maintain a good corporate governance as mandated by the law. The labor law in
China defines the obligations of the employees, employers, and all the shareholders. There are many people in China who are in
union groups. the role of unions is to represent workers as an individual worker cannot stand on his/her own.

Introduction
The China’s Demographic Data
The July 2017 estimate for population in the China was 1,379,302,771. This total population
presents an overall measure of prospective impacts of this country within its region and on the
world. There are several ethnic groups in the China; 91.6% are Han, 1.3% Zhuang, 7.1% others
(including; Manchu, Hui, Yi, Miao, Uighur, Tibetan, Tujia, Dong, Mongol, Yao, Buyei, Korean,
Bai, Dai, Hani, Kazakh, Li, and other nationalities) (Cia.gov 2018). As at 2017, China had a
population growth rate of 0.41%. As at 2018, 59.2% of the total China population lived in the
urban areas with an annual urbanization rate of 2.42%. The official language used in China is the
standard Chinese/Mandarin, Yue, Wu, Minbei, Minnan, Xiang, Hakka dialects, Gan, and minority
languages. Many couples in China were restricted by the 1979 mandate from having more than one
kid but this was loosened as at 2016 and couple were allowed to have an extra kid. Many couples
in China were restricted by the 1979 mandate from having more than one kid but this was loosened
as at 2016 and couple were allowed to have an extra kid. This may explain the slowed population
growth rate of this economy.

Economic Analysis
As at the 2017 Est., China’s GDP measured by purchasing power parity (PPP)
was $23.16 trillion; based on official exchange rate, it was 12.01 trillion. Its real
growth rate of GDP was 6.9%. GDP per capita based on (PPP) was $ 16,700. Gross
national saving was 45.8% of its GDP. In comparison of China’s GDP composition to
the world; household’s consumption was 39.1%, 14.6% government consumption,
43.3% investment in fixed capital, 1.1% investment in inventories, 19.7% exports,
and -17.8% imports. The rate of industrial production growth was 6.2%. Based on
occupation, Chinese labor force is distributed into; 27.7% in Agriculture, 28.8% in
industry, and 43.5% in services according to 2016 Est. 3.3% of its population live
below the poverty line. In comparison to the world, China has a -4.3% of its GDP
budget deficit. Its public debt is 47.8% of its GDP. Its inflation rate based on
consumer prices is 1.6%. Of late, this economy is going to face difficulties following
the imposition of a tariff on its exports by the US government.

Unemployment
In China, the update of unemployment rate is done quarterly. The available data for
China’s unemployment rate is available from December 1999 to 2018. This economy’s
unemployment rate has on average hovered around 4.09% for all those years. The highest
unemployment rate was 4.30 in 2009, and the lowest was 3% in 2000 (Ceicdata.com 2018).
There has been some improvements in the China’s unemployment rate in the latest years. In
March 2018, the reported level was 3.89%. The latest report made in June 2018 accounted for
3.83 unemployment rate. In December 2017, there was a drop in China’s labor force
participation rate to 68.93%.
The jobless rate in Australia does not include the 270 million migrant workers and
that’s how it has remained nearly the same (Beddor 2018). The jobless rate in China is now
survey-based and believed to be the best indicator. It is even going to include the migrant
workers who for the past six months have been living in the cities. Feng criticized the official
unemployment rate to be inaccurate arguing that the actual unemployment rate from 2002 to
2009 should have been more than 11% compared to the reported 4% (Wang 2018).

Historical and Cultural Factors Impacting the System of
Chinese Employee Relationship
There are several cultural factors that influence Human resource management in
China (Fu and Kamenou 2011). These include; one is guanxi where it is believed that
people will strong network connections can do business and set deals faster than someone
without the connection. Thus, it is considered more important in China to know your
counterparts both inside and outside the business workplaces unlike the usual instances
where you know people only on formal business meetings. However, this concept is usually
misunderstood in China business people. In china, personal relationships are governed by
guanxi where employees give gifts and favor to others to create a better relationship; this is
viewed as corruption from the western business perspective (Stewart 2017). They usually
prefer hiring guanxis rather than maintaining a sound business operation which is more
important. guanxi leads to development of a better deeper relationship among employees
since they may decide to form groups to achieve a certain goal together (Goh and Sullivan
2011). Guanxis may also lend money to others in order to maintain a good relationship.

Confucianism is another culture that is believed to be a way of life in
China. It’s an ethics system that stresses on the importance of embracing the
correct behavior, obedience and loyalty to hierarchy (Goscha 2017). The
attainment of worth and status through education was the major focus of
Confucianism. The Confucian teachings inspired the non-hereditary mandarins
system used in China where the appointment of high-ranking officials is done
through a rigid system of imperial examination.
Humanism; this is where it’s stressed that business leaders should ensure
that their employees come to work on good attitude and that they work on a
pleasant environment. Many businesses do not take into consideration these factor
and thus it undermines the worker’s productivity. If workers are happy about their
working conditions, they are only going to provide the best of their efforts. Violatti
(2013) pointed out that Confucianism has a central feature of humanism which
stresses on the roles and morals of a good leader. He noted that business leaders
should ensure that there is inner harmony and avoid the use of force punishments.

China Employee Relation
System
An employee is entitled to a statutory annual leave depending on the length of
service; this can only be affected by taking sick leave. During the period of Chinese
New Year, all employees are entitled to a three days leave. In China, annually there
are 11 holidays for which employees should not go to work. And those that go to
work during these holidays are entitled to premium payments. A worker should only
work for 8 hours a day equivalent to 40 hours in a week according to the statutory
requirements; any employee forced to work some extra hours is entitled for extra
payments. In China there are only regional minimum wage regulations but no
national minimum wage; the employers in every region are mandated to observe the
set wages for that region failure to which actions may be taken by the authorities
(Kanani 2017). A pregnant employee cannot be dismissed by her employer even if
she becomes redundant. National foreigners are restricted to be recruited for a job
vacancy.

They can only be recruited in the absence of a Chinese candidate processing
the required skills. Many other world economies have no restriction on the
employment of foreigners. In China, there is a requirement for internal vocational
training for the employees which the employers need to establish with some portion
of the wage bills. Many world economies do not support the provision of vocational
training. The employment contract relationship must be on writing; with exception
of part time jobs where it can be done orally. There are certain situations not
included in the employment contract but the employer could use to terminate the
employment contract; they are however in the statutory regulations (Yang, Zhenghe
and Wang 2018). The state has mandated some competent labor arbitral
commissions who can be used in settling employment disputes. Foreign workers are
required to have applied for work permits before they get employed, failure to
which they may face legal consequences together with the employer.

Human Resource Practices in China
Industrial relations in china are such that; the workers’ organizations
considered to be of autonomous forms are rejected, the federation of trade unions is
centralized, the center of productivity is by the increased importance of State Owned
Enterprises (SOEs); also in the distribution of basic services and necessities.
Irrespective of the commitment of the Chinese Communist Party (CPP) to the
worker’s welfare, it opposed independent workers’ action. The All-China Federation
of Trade Unions (ACFTU) was designated by the CCP to be the official intermediary
between party-state and the workers. On the economic planning, the Chinese
economy was taken to be one large firm (Ali 2005). Irrespective of the support for
the SOEs, China also had Collective Owed Enterprises (COEs) and Individual
Owned Enterprises (DPEs). Workers are either employed permanently e.g. the long-
life system, or temporary. Development to industrial relations has led to the
establishment of labor contract system.

Vocational Education and Training
(VET)
In China, there are three levels at which vocational education is offered;
Junior and senior secondary, and the tertiary level. Junior vocational education
is included in the 9-year compulsory education. In China, areas with less
development are the primary locations for junior vocational schools
(China.org.cn 2006). When students graduate from one level to another, they
join the next level of vocational education. The secondary vocational schools
in China as at 2001 were 17,770 (these includes; vocational high schools, skill
workers school and specialized secondary schools). The enrollment rate was
11,642,300 students 3,976,300 students were recruited. VET has been claimed
to improve the national competitiveness for China. A VET development plan
was issued in China on 2014 and is expected to make this economy to have the
largest world’s VET system (Litao 2016).

Corporate Governance
Corporate governance indicates how an organization should be managed or
governed. In governance, it’s the role of shareholders appoint directors and auditors
satisfactory to having an appropriate government structure. The board has several
responsibilities which include; setting the strategic aims for the company, ensuring
that the leaders put into effect the set aims, supervising the business management
and making reports of their stewardship to the shareholders (Msci.com 2017). The
actions of the board are subject to regulations, laws and shareholders. Good
corporate governance is defined from these core principles. In China, the adopted
board system is a two-tier system comprising of the board of Directors (BOD) and
the Board of Supervisors (BOS) with equal powers for all companies (Tsui 2010).
The responsibility of the BOD is to the shareholders while that of the BOS is to
supervise the affairs of the company.

Inter-firm Relations
There is a belief in China that the most important source of employment and innovation is the Small
and Medium Enterprise (SMEs). These SMEs have high potential of growth and are much flexible in
grabbing new market opportunities. Researchers in China found that the relationship between SMEs is
important in improving a firm’s performance. This was through monthly meetings among themselves.
During the meetings, firms learn from each other and there is development of partnership (Cai and Szeidl
2018). This is because some managers are less informed of the existence of various benefits that may lead
to efficiency in the business. For instance, some manager are aware of government grants while others do
not know anything about them. It’s during these meetings where those who don’t know are enlightened.
Relations with their own employees
The relationship between shareholders and the employees is covered in corporate governance. The
employers are expected to suitably care for the needs of their employees and to ensure that they have a
safe working conditions. China does not allow for the exploitation of employees. Employees have a right
to complain of any unfair practices forced against in the workplace and the shareholder will be held
liable.

Unions
The China labor laws recognizes the existence of unions as organization
representing workers in different industries. Other than representing their members’
whose contract provision has been violated, the activities of unions are; collective
bargaining over wages, working conditions and benefits to member workers. China
is different from US in terms of unions in that it has commitment in maintaining its
union structure which is monopolistically party-controlled. The troubles of unions
in the US are independent of its government. The unions’ ability to represent the
workers in China is affected by CCP’s top-down control. In China, there is lack of
trust for the unions and thus the unions are untimely in preventing the strikes by
workers. The unionization of members has fallen over the years and this according
to Groll (2013) is as a result of restriction of union powers by new state laws.

Conclusion
• China’s economic performance have improved since it joined the World Trade organization
• The guanxi is an important culture in China employee relationship and thus should be embraced in
other western economies.
• China’s industrial relation has improved over the years
• This economy is embracing the development of vocational education and trainings.
• The government has clearly mandated the rights the workers are entitled to.
• Foreign workers are not in a good position working on China because they can only be employed
whenever there is no Chinese with the required skills.
• The government, unions, workers and employers have a relationship. The employer is responsible for
taking good care of the employer; the employer is also obliged to follow the regulations of the
organization and the orders from employers. The unions are responsible for ensuring that the
employers offer good care and fair compensation to the employees (collective bargaining). The
government has a role of ensuring that rules and regulations set are followed by the employer, the
employees and the unions.

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