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Effect of Industrial Relations on China's Market-Driven Relations

Paper Type: Free Assignment Study Level: University / Undergraduate
Wordcount: 2548 words Published: 13th May 2019

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Critically assess to what extent industrial relations in China have transformed to market-driven relations.


With the development of economic globalization, human resources is undergoing tremendous changes. Since the reform and opening up, under the guidance of Deng Xiaoping’s concept of “respecting knowledge and talents,” economic reform has been guided by the principle of “opening up the door” and “four modernizations” and has opened a new chapter in China (Naughton, 1995). From the old “instruction economy” to the new “socialist market economy” (Lardy, 1994; Nolan, 1995). With the advent of the “socialist market economy” (White, 1996), the status of Chinese workers has also been constantly changing, and the standard of living of most people has been greatly improved, especially on the continuous dilution of the “Iron Rice Bowl” employment system. However, due to the long-term impact of the economic system, a set of rigid institutional and ideological concepts formed in the management of talent are still needs to be further deepened to reform. In this essay, I will around the transformation of the Iron Rice Bowl, the trade union’s handling of labor relations, and the relations among Confucianism in these arguments. Namely, I will compare the models of Chinese and American how they convergence and divergence from these perspectives: employment system, trade union organizing and influence, relationship between employees and managers.

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Main body

Employment system

From the Iron Rice Bowl system to management autonomy, the labor contract system is introduced. The Iron Rice Bowl was born in the shadow of massive unemployment in the early 1949s. Even though half of the urban workforce was unemployed during the economic reform period, the government actively interfered with the employment market and provided its opportunities and alleviated the unemployment problem. The government encourages enterprises to recruit unemployed people on the loose recruitment principle and provide state subsidies to help enterprises. The consequence of this is that over-accumulation of the labor force in state-owned enterprises, lack of economic incentives and labors’ liquidity, resulting in the failure of the socialist regime’s economy (Fung, 2001). Therefore, in 1952, in order to correct the previous mistakes and be determined to curb the size of the Iron Rice Bowl, the first five-year plan launched in 1953, so as to make more rational use of the labor force and establish a unified system of labor distribution, in accordance with the requirements of the national plan, improve efficiency (Chang, 1993). After the economic reform and opening up in 1978, the gradual withdrawal of state-owned enterprises and the inflow of joint ventures and private ownership in China broke the Iron Rice Bowl and shifted from the state to management autonomy. What’s more, the labor market has become more fluid, the government started the reform of the wage system in state-owned enterprises and introduced the labor contract system in 1986, linking the wage level with the performance of enterprises. The government has played a guiding role in the development of the labor force (Warner, 1999; Ding et al., 2000).

The Great Depression of the United States in the 1920, after the First World War, the inherent contradictions of the capitalist system led to the economic crisis. The stimulus effect of government spending on the economy weakened, foreign demand (exports) plummeted, a large number of workers were unemployed and the closure of factories led to the unemployment rate (Dore, 1999). Thus, large enterprises started to turn to the government for survival, in the New Deal of Roosevelt in 1933, the crisis was temporarily solved and large-scale unemployed and poor people were relieved. The National Recovery Act fixed wages and prices and brought workers Trade union rights, the establishment of a social security system.

Both China and the United States have experienced economic recession during the golden age of the economy in the economic golden era, but the government has adopted a policy of stimulating the economy. Both the institutional changes and institutional changes have given a clear direction for the market economy to the two countries.

Trade union organizing and influence

Trade unions bring a stability relationship to employees and enterprises. The economically unreasonable labor market continues to limit the primacy of human capital in employment distribution. Chinese trade unions have the dual wisdom of representing the collective interests of the state and safeguarding the rights and interests in workers. Chinese trade unions have also changed into the management of their labor relations and can carry out political and institutional innovations (Sheldon, 2011). For instance, the New River sweater industry in 2003 exploited labor market tensions to create a crisis for employers and endanger the local economy. The local government federation of local trade unions convened ‘collective bargaining’ for local labor and social security bureaus and labor representatives, culminating in a set of wage guidelines that were well-suited for all parties and stabilized the local labor relations.

While in the United States, American companies originated from the tradition of trade unions and labor-management authorities, with the implications of welfare capitalism in an increasingly institutionalized industrial conflict and increased government intervention in the economy under the New Deal (Edwards and Ferner, 2002). The companies and the state passed the Taft-Hartley legislation of 1947 and the communist purge of 1949 strengthened ties to maintain the growing power of the industry coalition (Dore, 1999). At the same time, the collective bargaining of labor contracts and the institutionalization of qualification terms has increased the employment stability and wage levels of workers.

It can be seen that the convergence on China and the United States, the trade union play an irreplaceable role in the construction of human resources due to their special status and functions. However, the imperfect management of the human resources department, the trade unions as voluntary mass organizations and organizations in the enterprises, staff participation in decision-making, democratic supervision, safeguarding the rights and interests of employees and enterprises, the relationship between labor and capital will also be stable, and enhance the service level, this is the influence of trade unions.

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Relationship between employees and managers

The impact of cultural differences, Confucianism has far-reaching impact on China. Hierarchy and high rights are one of the elements of Chinese cultural values. Besides, the key aspect of Chinese culture is respect for age and hierarchy, group orientation, the concept of face and the importance of relationships (Lockett, 1988: 484–5). Before 2000, Bond et al. (1987) found that the Confucianism was deeply rooted, attaching importance of the relationship and the qualifications of seniority and culture, the advocated social status culture cannot be easily removed from Chinese society or enterprises. Besides, employees focus on positions and social status, but pay more attention to the authority and status of superiors, they comply with the wishes of their superiors, take superior words and orders to work, because only the superior can decision making instead of subordinates.

But compared with the United States, ITco is a classic welfare capital company with a unique and lasting influence (Jacoby, 1997). Strong internal labor market is associated with very high employment security and very low turnover rates; the salary remains relatively good and the company launched a series of fringe benefits such as sickness and holiday pay; in addition, the global team makes every employees are equally represented, employees have the right to participate, discussing in the conference room and deciding what to do.

This shows that China and the United States divergence in this respect. In the United States, employees are more engaged than China and their relations between staff and managers in China are not perfect enough, which means that will bring some erroneous consequences: the subordinates cannot be in any way disagreement with superiors, whether superior or not, makes it difficult for employees to express their thoughts and suggestions to the manager. At the same time, the manager cannot tolerate his staff to challenge his opinions. It can be seen that the shallow concept of human resources makes it difficult for some young and talented people to stand out.


As mentioned above, a transformation of China from Iron Rice Bowl, improve the labor contract system has raised the mobility and efficiency of workers and brought labor to the enterprises. Trade unions also took a leading position during that period, bringing stability to the enterprises and employees labor relations and resolving the employment crisis. In addition, China was influenced by the Confucianism, workers cannot participate in decision-making, which has divergence with the United States. All in all, China has undergone a period of transition from social-planned economy to social marketing, recognizing some of its policy-making limitations and correcting them in a timely manner. Therefore, China can lead a trend from the transition from a socially planned economic system to a market oriented trend.



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