Remade in China: Foreign Investors and Institutional Change in China

By Scott Wilson | Go to book overview

6
Dismissal and Labor Turnover

The previous chapter analyzed Chinese efforts to reform compensation practices and the lessons drawn from the operation of Japanese and U.S. models in China. Chinese state interests established guideposts to shift away from the “iron rice bowl” model, and feedback from workers in the labor market and the lessons learned by human resources managers and diffused by the policy community helped to construct the path toward a U.S. model of compensation. The present chapter looks at two other crucial aspects of employment: hiring and retention/dismissal practices. As in the previous chapter, state officials identified loosening lifetime employment in SOEs as a target of reform efforts, but, frustrated by the intransigence of SOE staff and managers, officials turned to FIEs as models of how to handle hiring, retention, and dismissal of employees. In these regards, Japanese and U.S. investors presented very distinct institutional models, and ambitious Chinese workers in the market came to prefer U.S. (and European) human resources management practices. Chinese human resources managers and some Japanese general managers drew lessons from the pattern of Chinese workers’ reactions to Japanese labor practices, although many general managers persisted with their parent-company practices or only introduced moderate reforms. The pattern of FIEs’ influence on Chinese hiring and dismissal practices illuminates micro-level dynamics in the process of state-guided globalization, especially the role that FIEs and business consultants played in diffusing market-based labor practices to China.

China began its economic reforms and open-door policy without a free market to allocate labor, and they initially sought to control how foreign

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