Human Resource Management in China's 'Frontier' Special Economic Zone: A Study of Selected Enterprises on Hainan Island

Article excerpt

The political and military standoff between China and the United States over the 'spy-plane' incident in Hainan Island propelled the island into the global spotlight but its more longstanding claim to fame has long been its 'frontier' status in the Chinese economy. In this context, our empirical study examines the management of human resources in Hainan Island based on the field-work interviews in eight enterprises: two state-owned enterprises (SOEs) and six foreign-owned enterprises (FOES). This article looks at their Human Resource Management (HRM) characteristics, namely job design, employment relations, employment involvement, and industrial relations vis-a-vis the economic reforms of the PRC in a 'Special Economic Zone'. We conclude that the evolution of HRM in such enterprises depends on market, locational, culture and ownership variables.


Hainan Island has been placed at the forefront of China's economic reforms, namely by its designation as one of the Special Economic Zones (SEZs), located as it is at the periphery of China, next to the South China Sea. Its citizens have long had a reputation for being opportunistic and restless with official rules and regulations. Since it became a SEZ in 1987, it has experienced a significant change in terms of economic development and improving living standards (Zhu, 1992) although not without its share of corruption and scandals. However, Hainan has been seen as a window for China's Open-Door policy and foreign investment activities and achieved an administratively 'looser' status, free from its link with Guangdong province. Due to its special geographical location (far from the political centre of Beijing) and economic status with more autonomy as a SEZ (Ip, 1995 and 1999), changes in Hainan could be regarded as both quicker and more radical than in the inland areas such as in Dongbei (northeast) and Huazhong (central China) areas.

Those factors were the rationale for us selecting the Hainan SEZ as the location for this research project. By better understanding the economic policies and changes at the macro- level on the island, we can examine the pattern and practices of human resource management (HRM) at the enterprise level.

Human Resource Management

With the reforms of the employment system, a new terminology of HRM came to China in the middle of 1980s (see Child, 1994; Warner, 1995). In fact, HRM was said to rooted in both Western and Japanese management systems and later adopted and modified in the US and Europe. HRM is a relatively new term even in the Western society: it developed in its best-known form in the USA and arrived in the mid1980s in the UK and much of Europe. In China, HRM as an academic concept was introduced by joint teaching-arrangements between Chinese and foreign universities as well as in management practice in FOEs, mainly from Japan, the US and Europe. The translation of HRM into Chinese is 'renli ziyuan guanli' (with the same Chinese characters as in Japanese) which means 'labour force resources management'. But in fact, some people now use it misleadingly as a synonym for 'Personnel Management' (renshi guanli) and indeed treat it as such (Warner, 1996). This form of older PM practice is still very common in SOEs and a certain conservatism continues to pervade the administration of personnel in such enterprises.

Studying HRM in Chinese enterprises has become important because a major part of the Dengist economic reforms has been major changes in the employment and people-management systems. Before, under the 'iron rice bowl' system, workers had a job for life and weak motivation. The reforms of the 1980s and 1990s introduced more market-oriented practices at both macro- and micro- economic levels. These were to influence developments in enterprises in most of the areas of people-management to be described in this article.

In order to tackle these issues, we divide the article into the following sections: Section 2 provides a general background of economic reform and reforming HR in China, and the literature on the relationships between market economy, competition and flexibility and the pattern of HRM; Section 3 illustrates the economic reforms and related policies in Hainan; Section 4 is a case-study analysis of eight companies, (two SOEs and six FOEs) by examining job design, employment relations, employment participation and industrial relations; and finally the last Section comprises a discussion and conclusion, by presenting the major findings and tackling the questions which we raised at the beginning of the article. …