# China: economic growth and HRM HR Management

• Introduction

The People’s Republic of China (PRC) has an area of 9 561000 square kilometres, and had an estimated population of 1.3 billion people in 2001 (Thornhill, 2002a). Its capital is Beijing, which had a population of 13800 000 in 2001 (Financial Times, 1999a). China has experienced rapid economic, political and social development in the past two decades. The death of Mao Zedong in 1976 heralded the beginning of a period of economic reform led by Deng Xiaoping.

During this period China adopted an ‘open door’ policy for encouraging trade and technology transfer. The management of the economy moved from a centrally planned command economy to a socialist market economy (CCCC, 1993). Annual economic growth has averaged 9 per cent since 1978. Domestic spending rose by five times in the 1990s. There has been a rapid increase in the number of foreign-invested enterprises in China (Ding and Warner, 1999).

Foreign investment in early 1996 was US$7.74 billion. This had risen to record levels of US$ 46.8 billion by 2001 and is predicted to rise to $53.8 billion by 2003 (Thornhill, 2002a). China was the largest recipient of foreign investment after the United States. The levels of China’s foreign currency reserves were second only to those of Japan in 1999 (Kynge, 1999). China’s main trading partners were the United States, Japan and the EU to which it exported goods totalling 20.4, 16.9 and 15.4 per cent of its output respectively in 2001 (Thornhill, 2002a). It was anticipated that the value of merchandise exports would rise from$266.2 billion in 2001 to \$324.2 billion in 2003 and that these levels could increase significantly in years to come as a result of China’s entry into the World Trade Organisation (WTO) in December 2001. The speed of economic development slowed down slightly after 1998. While China was not severely affected by the economic crisis in Asia during 1997–8, it was exhibiting certain institutional weaknesses. The World Bank highlighted three main problems in its report ‘China: weathering the storm and learning the lessons’ (1999). These were:

• weaknesses in corporate governance, and a poor definition of ownership and accountability;
• government interference in investment decisions;
• a lack of speed in terms of setting up satisfactory mechanisms by which to regulate the financial sector.

In conjunction with these institutional weaknesses, there were associated problems of corruption within the system. It was estimated that one-fifth (Rmb 117bn) of central government revenues had been misused in the first eight months of 1999 (Kynge, 1999). The lack of legal regulation meant that foreign businesses often experienced problems when setting up businesses within China (Murray, 1994; Peng, 1994).

These included dealing with broken contracts, incurring bad debts, and completing property developments. However, there is evidence that government is beginning to make progress with such issues, spurred by the need to implement rules and regulations in order to comply with its membership of the WTO. China is now facing a changing climate of export opportunities and foreign investment on the one hand and industrial restructuring, downsizing and unemployment on the other. Some commentators have observed that the massive influx of foreign investment could ‘undermine the viability of the country’s remaining state-owned enterprises which still employ millions of workers’ (Thornhill, 2002b: vi) and that membership of the WTO could accelerate the speed of redundancies in state-owned enterprises (SOEs).

The industrial restructuring and related unemployment could be potentially critical given the lack of an adequate social security net at present (Mok et al., 2002). However, it is anticipated membership of the WTO will lead to soaring export growth as restrictive quotas set by other countries are reduced or scrapped (Lardy, 2002). Other developing countries in Asia fear that foreign direct investment will centre upon China and that they will find it difficult to compete against Chinese exporters (Burton et al., 2001). The question is whether the predicted ‘export boom’ will be sufficiently able to mediate the predicted levels of unemployment. Later in this section we provide an overview of some of the key business and HR issues that are impacting upon China today.

• The ‘iron rice-bowl’ to ‘socialism with Chinese characteristics’

An historical overview serves to provide a framework for understanding some of the contemporary human resource issues that are impacting upon China. The historical review begins by focusing upon the period during which Mao Zedong was in power. Child (1994: 36–38) suggests that one can categorise four main phases of industrial governance during this period. These are summarised below.

• Phase 1: Central planning 1953–56
Mao Zedong came to power in 1949. He advocated that China should move to an economy based upon socialist ownership. The Five Year Plan was launched in 1953. This included moves towards centralised planning and control from the state. Trade unions did exist, but their role was confined to dealing with welfare issues. Complicated piecerate systems were used to reward many workers.
• Phase 2: Decentralisation and the Great Leap Forward 1957–61
The system of industrial governance that developed as part of the five-year plan was influenced by the Soviet system. Child argues tha this tended to be very hierarchical, and as such was not in sympathy with a Chinese culture in which collectivism was a central feature. The Great Leap Forward was a period within which many of the collectivist values came to the fore. During 1957–61 control for much of industry passed from central to provincial government. However, a great emphasis was placed upon allegiance to the Communist Party, and factory directors had to report to party committees. The system of bonus payments was reduced.
• Phase 3: The period of readjustment 1962–65

The 1959–61 period saw a drop in agricultural output, followed by a famine. This was partly caused by an overemphasis on expanding the manufacturing sector during the Great Leap Forward. The period of readjustment saw moves back towards more centralized planning; however, factory directors were given more control over day-to-day production issues.

• Phase 4: The Cultural Revolution 1966–76

The Cultural Revolution was a distinctive period, during which politics and ideology were the predominant concerns. There was a great emphasis upon allegiance to the Party. Factories moved away from hierarchical control towards using factory revolutionary committees as the management mechanism. In terms of rewards, ‘competitive, individual and material incentive was rejected in favour of cooperative, collective and moral incentive’ (Child, 1994: 37).

Therefore, a context of collectivism and control developed. Child comments that Child’s summary of the four phases of industrial governance gives an insight into the context that developed during the rule of Mao Zedong. The role of the state was central throughout. The state managed the economy, and increasingly enforced its ideology upon the citizens. China was relatively undisturbed by foreign influence during this period.

Child notes that social and political discipline was used as an effective force for controlling the Chinese people. One of the legacies of Mao’s rule was the system that became known as the iron ricebowl. This related to the provision of lifetime employment and cradle-to-grave welfare structures (Ding et al., 2000). The enterprise played both an economic and a social role, and would provide its employees with housing, medical support and education provision. Central to the enterprise were work units (danwei).

The danweis formed the core of the community. Ding et al. (2000) comment that a number of writers have suggested that the iron rice-bowl encouraged a high degree of ‘organisational dependency’. They argue that organisational dependency is a deep-seated feature of the Chinese system, and that it has encouraged attitudes and behaviours that are difficult to change. The implications of organisational dependency interlinked with many of the HR issues that are discussed below.

China’s industrial production was dominated by state-owned enterprises. These accounted for 80 per cent of industrial production in 1978 (Warner, 1997). Under the full employment system that emerged, the dismissal of workers was allowed only if a worker had committed ‘gross negligence’, but this term was open to interpretation, and the sanction was rarely used even if the individuals concerned were undisciplined. In order to avoid the problems that are associated with unemployment, a system of ‘featherbedding’ was used, which resulted in enterprises that were overstaffed, with low levels of productivity (Child, 1994).

Wages were based on seniority, and there was no real incentive for employees to strive for promotion. There was no concept of a labour market, and individuals were not allowed to move within China to ‘follow work’. Trade unions existed, but had a different role from their Western counterparts: The Cultural Revolution was seen to have dissipated incentive and responsibility for economic performance through egalitarianism, the weakening of management, the general devaluation of expertise and the claim that ideological fervour and inspired leadership could substitute for technical knowledge . . . The xenophobia of the period had denied the country opportunities for inward investment and technology transfer.

Therefore the union role centred upon production and welfare issues. They would not be involved in negotiations on pay and conditions, as would be the norm in Western countries.

• Post-1976: ‘Socialism with Chinese characteristics’

After the death of Mao Zedong in 1976, Deng Xiaoping assumed power in China. Under his leadership China embarked on an economic reform programme. This included the commencement of an ‘open door’ policy in which international trade and the influx of foreign technology were encouraged. The term ‘socialism with Chinese characteristics’ was first used by Deng Xiaoping in 1982 to describe the approach to economic reform.

China allowed joint ventures to operate from the early 1980s onwards. From this point, foreign invested enterprises (FIEs) became widespread. Foreign companies provided technology and managerial knowledge (Ding et al., 2000). In 1999 the government amended the constitution to formally recognise the concept of private ownership. Employment in the private sector rose from 150 000 to 32.3 million in the period from 1980 to 1999 (Montagnon, 1999a).

FIEs were important in terms of providing employment, technology and modern management techniques. However, the process of modernisation has not been painless. One of the key problems was that the SOEs were overmanned and underinvested. Reports suggest that the number of bankruptcies in the PRC rose from 98 in 1989 to 8939 in 2001 and approximately 60 per cent of these were in SOEs (Thornhill, 2002a). In the period between 1998 and 2001, 25 million employees lost their jobs in SOEs.

In 2002, 150 000 SOEs remained, employing 50 million workers. Workers in the SOEs had been socialised into the iron rice-bowl mentality, in which they expected that the organisation would provide cradle-to-grave employment and welfare. One of the aims of the modernisation programme was to move away from this. In 1992 personnel legislation was introduced that became known as the three systems reforms. The three key areas were: the introduction of labour contracts, performance-related rewards, and social insurance reforms. Warner (1996) provides a useful summary of the key differences between the traditional system and the emerging system of labour reforms within China.

The 1994 Labour Law provided a further spur to the modernisation. It aimed to provide regulation for ‘a labour system compatible with a social market economy’ (Warner, 1997: 33). The law covered a variety of issues, including the right for workers to choose jobs, equal opportunities, minimum wage levels, directives on working hours, and provisions for dispute handling and resolution. Warner comments that one of the implications of the 1994 Labour Law was that the distribution of power would be readjusted so that the trade unions could have more autonomy from the state.

The process of modernisation has meant that there is no longer a ‘job for life’. Other aspects of the iron rice-bowl are also beginning to wane. From 1998 the danweis were no longer allowed to allocate subsidised housing, and allowances for education and medical support were slowly being reduced (Kynge, 1999). The modernisation programme led to The All China Federation of Trade Unions (ACFTU) were assigned two functions: by top-down transmission, mobilisation of workers for labour production on behalf of the State, and by bottom-up transmission, protection of workers’ rights and interests.

SOEs being restructured and downsized. However, it is estimated that SOEs currently have 20 million employees excess to requirements (Montagnon, 1999a). Mok et al., (2002: 411) found that a ‘strong sense of destitution and betrayal [was] experienced by most state workers who used to be the ‘labour aristocracy’ in China’. They go on to note that the sense of inequity has been fanned by the media attention that has focused upon successful millionaires. There is a concern that unemployed workers from the SOEs may not pass easily into the labour market. Evidence of worker unrest is emerging; for example, 216 750 strikes and demonstrations were recorded in 1998 which included 3.5 million workers. Within this number, there were some instances of violence and 78 deaths occurred (Mok et al., 2002).

The government has set up a system of social security. The cost of the social security bill rose by 23 per cent in 1998, and unemployment rose from 3.1 per cent in 1998 to 5.5 per cent in 1999 (Montagnon, 1999a), Clearly, unemployment will remain as a key concern for some time to come, especially given the huge levels of surplus labour within the SOEs. Chinese officials are predicting that 10 million people may be affected by unemployment in urban areas in the period up to 2006 (Mok et al., 2002). A process of modernisation is taking place, but the size and historical development of China mean that this is a slow process. The legacy of the iron rice-bowl is still apparent, and complete reform is still a long way off.

• HRM with ‘Chinese characteristics’?

Economic reforms in China have allowed the influx of foreign interests, and have set a new context in which both indigenous Chinese and foreign invested companies manage the employment relationship. There is a debate as to whether employment systems in the Asian bloc are converging towards common approaches to HRM or, alternatively, whether they are becoming more divergent as time goes by.

Some have argued that an Asian model of HRM exists. The Asian model has been characterised by: non-adversarial relationships; low union density, or unions (as in China) that are closely controlled by the state; and low instances of overt industrial conflict. However, as we have already noted, academics are now beginning to appreciate that the Asian bloc is far from homogeneous, and differences in IR/HRM systems reflect different national histories and cultures (Leggett and Bamber,1996; Rowley, 1997; Warner, 2000). Part of the remit of this section is to explore the extent to which employment systems in China are becoming more ‘Westernised’.

This seems possible for two main reasons: first, the high levels of foreign investment in the country, and second, the fact that the modernisation programme has increasingly subjected the SOEs in particular to the logic of the market. The debate regarding the extent to which Chinese enterprises are adopting HRM is a problematic one. Academic perspectives on this issue relate back to the wider debate about the nature of HRM itself. Child (1994) questions the extent to which one can utilize the term ‘HRM’ as a descriptor for the management of personnel in Chinese enterprises:

Therefore authors such as Child believe that the term ‘HRM’ is unsuitable as a model for analysis to be used within the Chinese context. Others, however, are explicitly using mainstream HRM models in order to analyse human resource issues within China. Benson and Zhu (1999) use Storey’s model of HRM, which categorises four key elements of HRM (beliefs and assumptions, strategic aspects, management role, and key levers), in order to evaluate the extent to which six SOEs were adopting HRM practices.

They refute Child’s assertion that the concept of HRM is not found within Chinese enterprises. By reference to the Storey model, they conclude that there were three models of HRM within their sample. The first model was a minimalist approach, in which two of the SOEs had made few attempts to adopt an HRM approach. The second model was one in which two companies had attempted to adopt an HRM paradigm. Part of this was related to the fact that both of these companies were relatively small, and had strong connections with foreign companies via joint ventures or contracting arrangements.

The third model represented a transitional stage between the old and the new. Benson and Zhu argue that there is evidence that some enterprises had developed the concept of and practices associated with HRM, and the extent to which this had happened depended upon factors such as market forces and changes in legislation. Their evidence does not, however, suggest that HRM is the dominant paradigm, and they acknowledge that factors such as China’s historical development and cultural traditions can act as a barrier to the development of a Western model of HRM.

Clearly, the extent to which China is adopting an ‘HRM’ approach is a matter of some debate. The evidence seems to suggest that some enterprises may be adopting some of the practices that are associated with Western models of HRM, but it is unlikely that full-blown models are widespread. Some authors have focused upon the linkages between HRM and organisational performance within the Chinese context.

Bjorkman and Xiucheng (2002), for example, found some support for the notion that organizational performance appeared to be positively influenced where companies had a strong integration between HRM and strategy. They also suggested positive relationships between performance-based rewards, individual performance appraisal and organisational performance. They do, however, acknowledge the relatively small size of their sample and the relative lack of understanding at present about the intervening variables that ‘knit together’ HRM and organisational performance.

The following sections will review some of the evidence regarding different aspects of contemporary HR/personnel practice within China.

• Employment contracts, surplus labour and social insurance

Part of the modernisation process has included the shift to a more decentralised and flexible labour market. The employment contract system was formally implemented in 1986, and it gave employers the ability to hire employees on contracts that specified the terms of employment. Under this system, enterprises were able to downsize and remove problematic employees (Ding and Warner, 1999). The drive to modernise the labour market was further progressed by the provision of subsequent legislation such as the personnel legislation of 1992 and the 1994 Labour Law.

This meant that both individual and collective labour contracts could be set up. The collective contracts would cover employees belonging to an enterprise, and would be arranged via the trade union. Collective contracts would cover areas such as pay and conditions, working hours, holidays and welfare (Ding and Warner, 1999: 249). As highlighted above, one outcome of the reform programme has been that a substantial number of redundancies have been made.

Seventeen million employees of SOEs had been laid off by the end of 1998 (Benson and Zhu, 1999). Prior to the economic reforms, the enterprise took responsibility for welfare issues such as pensions and medical cover. Since the reforms, the government has had to set up a system of social insurance. The funds for social insurance are contributed to by the state, the enterprise and individual employees (Ding and Warner, 1999). Social insurance is designed to act as a safety net, particularly for employees who are made redundant. One of the issues that China will have to deal with is the rising cost of social insurance (Montagnon, 1999a).

For example, the cost of moving towards a fully funded pension system by 2030 could reach Rmb 3000 billion (Thornhill, 2002a). In conjunction with this is the fear of further social unrest resulting from mass redundancies (Mok et al., 2002).

• Recruitment, selection and training

One of the impacts of the reforms has been that there is now greater mobility within the labour market. Prior to the reforms, workers were assigned to firms from labour bureaus. This often meant that workers were assigned even when they did not hold the requisite skill and knowledge for the job. While there is the possibility for greater labour mobility now, evidence suggests that mobility remains fairly low, especially in the shopfloor workers category (Tsang, 1994; Ding and Warner, 1999; Benson et al., 2000). Table demonstrates the continuing role of external agencies in the recruitment process.

Evidence suggests that mobility is higher within the managerial ranks. There are reports, however, that joint ventures continue to find it difficult to recruit employees of SOEs (Tsang, 1994). This is due to a number of reasons, including SOEs retaining employee files, which means that the employee can be cut off from a range of benefits. Zhu and Dowling (2002) have suggested that recruitment and selection practices were becoming less influenced by political bureaucracy and more influenced by economic and market concerns. For example, there is more emphasis upon personal competency as a criteria, rather than an individual’s political background.

This trend was more evident within foreign invested enterprises. Overall, China has a large pool of unskilled and semi-skilled labour from which to draw, but there is a dearth of managerial employees and engineers with the skills and knowledge that modern industry and commerce require (Ding and Warner, 1999). One of the HR problems confronting China is the huge scale of training and development that is needed to ensure that industry and commerce can continue to develop. Warner (1992) suggests that this relates back to two key factors. First, education and development were severely disrupted during the Cultural Revolution; for example, management development and training were banned during this period.

The lack of effective training and development meant that there was a lack of educated managers and engineers, and the legacy of this still remains today. Second, the speed of economic development in China has meant that there is a great demand for educated, skilled staff. The state has responded by encouraging the development of an infrastructure for management development and training (Child, 1994). However, there remains a lack of systematic training within companies. Foreign investors in joint ventures (JVs) can find that Chinese partners often request an enormous amount of overseas training for indigenous employees.

FIEs can also experience problems in retaining staff they have trained, especially given the tight labour market for skilled managerial and technical employees (Tsang, 1994). Training and development issues are likely to remain as continuing concerns for the future within China (Glover and Siu, 1999).

• Reward systems and employee relations

The review above has highlighted some of the changes in relation to reward systems. The seniority-based flat rate system is now being replaced by systems that often have some link to performance. Wages were determined by legislation and regional agencies until the mid-1980s, and seniority was the most important factor in terms of employee earnings, but other aspects were entering the equation by the mid-1990s. Factors such as responsibility and qualifications have started to be taken into account (Benson et al., 2000).

However, the evidence remains that SOEs are often unwilling to increase wage differentials. State enterprises have tended to pay equal bonuses to all employees regardless of the performance of individual employees. They have also retained a great degree of harmonisation of work conditions (Benson et al., 2000). This appears to be an example of the way in which the principle of equality has endured post-Mao. Ding and Warner (1999) carried out a study that compared the average monthly wages of SOE and JV employees.

Their evidence demonstrated that while SOEs and JVs tended to adopt the same basic wage structure – a basic salary plus bonuses and allowances – the JVs tended to pay much more on average. The results are summarised in Table . Therefore, while there have been overall moves to increase flexibility within reward systems and linkages between pay and performance, some aspects of the old system endure, including the reluctance of SOEs to penalise poor performers (Benson et al., 2000).

The discussion will now turn to employee relations. The role of trade unions has been highlighted above. Trade unions have in the past tended to play a different role within Chinese enterprises, tending to concentrate on welfare issues and assist in production issues. This situation remains much the same today. Benson et al. (2000) comment that while trade unions currently seem to be ‘relegated’ to the role of ‘watchdog’ over issues such as health and safety and workers’ rights, they could potentially play a role in securing better conditions for their members in the future.

However, they point out that the traditional role of assisting management in achieving optimum performance could eventually create conflicts, and that The preceding review has given an overview of the current situation in key areas such as employee resourcing, development and relations. It seems that China is beginning to use techniques that are derived from Western and Japanese practices.

However, the full-scale adoption of Western-style techniques is unlikely, at least in the short term, as these would be incongruent with Chinese culture and the historical development of their business traditions. The following section will highlight some of the issues that impact upon the management of people in China.

Average monthly wages (RMB) 1994–96

• Culture

This section will provide an overview of some of the issues that influence the management of people in China. These include the impact of culture, the lack of managerial skills, problems of labour discipline, and dealing with low motivation. Warner (2000) has noted that a great deal of divergence remains within the Asian bloc, and that one of the explanatory variables for this is the impact of national cultures upon human resource systems.

Culture is a notoriously difficult concept to define, and it is hard to make broad generalisations that would fit all individuals and groups within a particular country. China, for example, comprises a huge land mass, and many argue that one can find differences in culture between people from the North compared with those of the South. For example, Northern Chinese tend to speak Mandarin, while many southerners speak Cantonese.

However, it is useful to outline some of the features that are associated with Chinese culture, in order to understand some of the HR issues that are affecting both SOEs and FIEs. Child (1994: 28–32) provides an overview of some of the key aspects of Chinese culture. He points out that there is a degree of agreement that Confucianism is the basis for many Chinese traditions. An understanding of Confucianism does help one to understand certain values, attitudes and behaviours within the Chinese context. Fan (1995) suggests that Confucian ideologies are relevant to contemporary studies for four main reasons:

• Confucian ideology has become firmly rooted as an ‘undeniable’ system that governs many aspects of Chinese lives.
• Thousands of years of a feudalistic system have dominated the Chinese view of themselves and the world.
• To gain acceptance in China, new ideas have to be proved to be compatible with classics and tradition.
• The current economic reforms are not necessarily changing Chinese people’s fundamental mentality or behaviour.

Kong Fu Ze (551–479 BC) was called Confucius by Jesuit missionaries. His philosophy on life became popular some 300 years later. The fifth Han Emperor, Wu, found that Confucian ideologies fitted well with the need to create a strong, centralised monarchy. Confucianism emphasised a respect for elders and the family, order, hierarchy, and a sense of duty. Confucius believed that individuals had a fixed position in society, and that social harmony could be achieved when individuals behaved according to rank (Jacobs et al., 1995).

There was an emphasis upon the ‘correct and well-mannered conduct of one’s duties, based upon a sound respect for the social conventions of a patrimonial society’ (Child, 1994: 29). Age was respected, particularly in the case of male elders. Child quotes Lockett (1988), who identified four values that are central to Chinese culture, and which are based upon Confucian ideologies:

• respect for age and hierarchy;
• orientation towards groups;
• the preservation of ‘face’;
• the importance of relationships.

‘Face’ is an important concept, and it relates to a person’s social standing, position and moral character. Child (1994: 30) comments that the Chinese attach great importance to how they are viewed by others ‘Face’ means that conflicts within a group would be kept private, as the group would be demeaned in the eyes of the wider community if conflict were overt. The importance of relationships is captured in the concept known as guanxi. Luo and Chen (1997) note that ‘guanxi refers to the concept of drawing on connections or networks to secure favours in personal or business relations’.

Guanxi relates to relationships that are outside the person’s immediate family (Child, 1994: 30). The concepts of guanxi and face are intertwined, and some have argued that they can act as inhibitors to the modernisation programme (Chen, 1995). The preceding paragraphs have given a short overview of a complex subject. There is much evidence that FIEs often find it difficult to operate within China, and that some of the problems are caused by a lack of appreciation of Chinese culture.

The examples quoted have highlighted some of the underlying tensions that have developed between foreign and Chinese partners. Peng (1994) has commented that foreign investors have complained that Chinese managers lack initiative, are unwilling to delegate, and are perceived to be unsystematic. Lockett (1988) argues that such behaviours reflect aspects of Chinese culture: for example, he reminds us that during the Cultural Revolution managers were promoted according to Party allegiance rather than on the basis of merit.

He argues that this legacy has hampered the level of management skill in China. The tendency towards collective rather than individual orientation often leads to behaviours that clash with the behaviours expected by foreign counterparts. Chinese managers will often avoid taking individual responsibility, and Child (1994) argues that this is due to a combination of Chinese traditions and the Cultural Revolution.

Jacobs et al. (1995) argue, however, that there is too much emphasis upon the negative implications of Chinese culture. They argue that Confucian-based philosophies can lead to positive outcomes in the workplace, because of the emphasis upon ‘diligence, responsibility, thrift, promptness, cooperation and learning. More research is needed in order to evaluate the impact of Chinese culture upon business performance.

• Management skills, labour discipline and motivation

One of the issues affecting China today is a dearth of appropriate management skills. Tsang (1994) argues that the lack of skills relates to four main factors. First, the Cultural Revolution severely disrupted education, training and development. Second, central planning meant that managers had little autonomy. For example, all products were sold to the state at a predetermined price. Therefore managers did not have the scope to develop entrepreneurial skills.

Third, mistakes were severely penalised, but achievements were not rewarded. Fourth, important decisions were made by collective consensus, managers saw themselves as an ‘information conduit’ and individuals were unwilling to take risky decisions (relating back to the danger of losing face). Again, these behaviours relate back to a combination of Confucian ideology and the legacy of the Cultural Revolution.

The development of adequate levels of managerial skill is likely to remain as a key issue for the future. Two linked issues are the problems of labour discipline and low motivation. Evidence suggests that Chinese managers are often unwilling to discipline staff, as they prefer to avoid overt conflict and maintain harmony (Tsang, 1994). While Chinese culture emphasises the importance of hard work and diligence, the system of featherbedding in SOEs meant that the enterprises were overstaffed and productivity was low. Tsang quotes from the China Daily:Labour discipline in our enterprises is very lax.

Some workers don’t work eight hours a day, a few are absent for a long time to engage in speculation and profiteering. Others even turn to street brawling and stealing of state property. There are also technically incompetent people who do not seek improvement, but just drift along, wasting their own and other people’s time. (Tsang, 1994: 5) This comment reflects the fact that China is going through the equivalent of an industrial revolution, in that many workers are being drawn from agricultural work to factory work.

The problems highlighted above are reminiscent of those that faced nations such as the USA, Japan and the United Kingdom as they went through their own industrial revolutions and sought to find ways in which to control and motivate agricultural/ migrant workers (Zuboff, 1988; Buchanan and Huczynski, 1997). Glover and Siu (1999) have pointed out that FIEs based in Southern China often employ migrant workers from the North of China. Their case study evidence suggested that the main aim of the migrant workers was to accumulate money and return home as soon as possible. For this reason, they were not motivated by the prospect of career development.

As a result of this, they had a purely instrumental attachment to the company, and no real stake in the long-term prosperity of the firm. It is also important to point out that part of the attraction of the joint venture was that the company could take advantage of the low pay levels in China. In other words, the company itself was operating in an instrumental way in respect of its use of manual labour in China. Glover and Siu identify a range of problems that were being encountered by the company, many of which were related to human resources issues rather than equipment failures.

Burrell (1997) describes such workers as the ‘peasantariat’, and argues that Burrell argues that although many of the world’s workers are in fact peasants, traditional organisational theory has ignored this and has essentially led to a lack of knowledge and understanding about the motivations and aspirations of a numerically significant group of workers. More research is needed in this area.