Fang Lee Cooke, MBS, UK ANBS Fellow, Austra lia 1 Managing people – Foreign MNCs in China and Chinese MNCs abroad Overview of the session Part I: Key features of and changes in employment relations (ER) in China Part II: Characteristics of ER in western MNCs in China Part III: Motives of Chinese firms investing abroad Major challenges to ER of Chinese MNCs in different parts of the world Case study of a leading Chinese IT MNC – Huawei Technologies Ltd Questions and discussions
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Managing people – Foreign MNCs in China and Chinese MNCs abroad
Managing people – Foreign MNCs in China and Chinese MNCs abroad. Overview of the session Part I: Key features of and changes in employment relations (ER) in China Part II: Characteristics of ER in western MNCs in China Part III: Motives of Chinese firms investing abroad - PowerPoint PPT Presentation
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Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
1
Managing people – Foreign MNCs in China and Chinese MNCs abroad
Overview of the session
Part I:Key features of and changes in employment relations (ER) in China
Part II: Characteristics of ER in western MNCs in China
Part III:Motives of Chinese firms investing abroadMajor challenges to ER of Chinese MNCs in different parts of the worldCase study of a leading Chinese IT MNC – Huawei Technologies LtdQuestions and discussions
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Part I: Key features of and changes in ER in China
Key elements influencing employment relations
Industrial sector (e.g. manufacturing v. service)
Ownership forms (e.g. state-owned, private, foreign-funded)
Labour market characteristics (e.g. bargaining power of the workers)
Employment legislation (level of provision and effectiveness)
Strength and role of the trade unions (e.g. level and nature of representation)
Product market competition and level of globalisation (pressure on employers)
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Traditional employment relations in the state sector in China
A dominant sector (80% of all urban employment in 1970s to less than 24% in 2005)
State-sponsored miniature society with extensive welfare and job-for-life
Centralisation, formalisation and standardisation of personnel policies and practices (e.g. job allocation, wage determination)
Personnel department at organisational level only play administrative role
Employees had no real voice in the business but could expect to be relatively well looked after as ‘the master of the country’
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Changes in HR policies in the state-sector in the 1990s
The need to revitalise the state sector and improve productivity and service quality
‘Three Systems’ reform in SOEs:
Fixed-term employment contract – the end of job-for-lifePerformance-related pay (wage linked to position, compete for the post) New welfare schemes in tripartite system between employer, employee and the insurance company
Withdrawal of other welfare benefits, e.g. housing
Mass scale laid-offs since mid 1990s (27 millions from SOEs)
Privatisation of small SOEs
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Table 1. Employment growth in the private and other forms of ownership between 1990-1999
Sources: China Statistics Yearbook, 2000; Forty Years of China Industry and Commerce Administration Management, 2000.
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Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Employment relations in the new forms of ownership
Privately-owned companies and self-employed businesses
Once marginal and marginalised sector at odds with socialist ideologies
Growth since the 1980s an outcome of shift from state-controlled planned economy towards a free market economy
The need to revitalise the economy and create employment opportunities
More flexible, smaller in scale, less employment protection, worse employment terms and conditions (e.g. longer working hours, lower level of pay, labour rights), higher labour turnover rate
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Employment relations in the new forms of ownership (cont…)
An outcome of the ‘Open Door’ policy since late 1970s
China as the second largest FDI recipient country
Only allowed partial freedom in the 1980s, but now full operating rights within regulations
Blue chip MNCs as well as sweatshops
HRM practices differ from domestic Chinese firms
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Employee representation (1)
The role of the trade unions
Only one union recognised – All-China Federation of Trade Unions (no ‘trade’ characteristics)
Welfare role and training role under the leadership of the Communist Party
Unionisation level high in the state sector but low in private sector
Union presence has little impact on wage level
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Employee representation (1) (cont…)
The role of the trade unions
Trade unions more organised and competent in certain sector (e.g. large SOEs)
Misguided perceptions of managers and TU reps about their role
Union reps lack of collective bargaining or negotiation skills and other resources
Low opinion of workers on the effectiveness of the TU
Trade Union Law (1950, 2001)
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Employee representation (2) Workers’ Congress
Made up of workers’ representatives to supplement the TU
Little effect of Workers’ Congress – annual meetings not regularly held
Many companies do not have the forum in place
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Table 2. Union membership level in organisations where unions were established
Year
No. of grassroots
unions (1,000 units)
No. of employees
(1,000 persons)
No. of Female
employees (1,000
persons)
Membership (1,000
persons)
No. of female
members (1,000
persons)
Membership density (%)
No. of full-time union
officials (1,000
persons)
1952 207 13,932 -- 10,023 -- 71.9 53
1962 165 26,671 -- 19,220 -- 72.1 86
1979 329 68,972 21,717 51,473 -- 74.6 179
1980 376 74,482 25,186 61,165 -- 82.1 243
1985 465 96,430 35,967 85,258 31,492 88.4 381
1990 606 111,569 42,910 101,356 38,977 90.8 556
1995 593 113,214 45,153 103,996 41,165 91.9 468
2000 859 114,721 45,345 103,615 39,173 90.3 482
2001 1,538 129,970 50,879 121,523 46,966 93.5 --
2002 1,713 144,615 51,576 133,978 46,652 92.6 472
2003 906 133,016 50,793 123,405 46,012 92.8 465
2004 1,020 144,367 55,026 136,949 51,353 94.9 456
Source: adapted from the China Statistics Yearbook 2005, p.777.
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Employment legislation in China
Framework:
The Labour Law of China (1995)
The Trade Union Law (amended 2001)
Equal opportunity regulations
Minimum wage regulations (1993)
Other regulations specific to sector (e.g. The Civil Servants Law), ownership (e.g. MNCs and JVs), or HR function (e.g. training and recruitment)
Labour Contract Law (2008)
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Employment legislation in China (cont…) Effectiveness?
Loopholes in the regulations themselves (e.g. age differences in retirement, minimum wage)
Low level of awareness of regulations from employers and workers
Tolerance from workers of employers’ unlawful behaviour for fear of job losses
Unsympathetic attitude of labour officials towards (rural migrant) workers
Dilemma of/conflict between law enforcement and employment pressure for the state
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Part II. Characteristics of ER in western MNCs in China
Employers of choice for young graduates
Sophisticated selection and assessment process for recruitment
More extensive training and career development opportunities, including overseas training and assignments
More focus on performance management for pay as well as development purposes
Higher level of pay for regulations and competition reasons
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Part II. Characteristics of ER in western MNCs in China (cont…)
Pay more closely related to performance level instead of seniority
Higher level of adoption of western oriented HRM practices, e.g. org. culture mgnt, quality mgnt, EI to enhance performance, talent mgnt, work-life balance initiatives
Proactive in CSR but pragmatic approach to trade unionism
For years, MNC like Wal-Mart have resisted the call for union recognition
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Part III. Chinese firms investing abroad
Four major motives for FDI (Dunning and Narula, 2004): Marketing-seeking Resource-seeking Asset-seeking Efficiency-seeking
Exactly where firms can fulfil these motives are often location-specific
Firms engage in FDI not only to transfer their resources to a host country (asset exploitation), but also to learn, or gain access to, the necessary strategic assets available in the host country (asset seeking).
J. Dunning and R. Narula, Multinationals and Industrial Competitiveness: A New Agenda, (Cheltenham: Edward Elgar, 2004)
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Motives of Chinese firms investing abroad
Pull strategies by foreign governments – tax incentives and other favourite conditions
Push strategy by the Chinese government – ‘Go global’, tax incentives, subsidies, national bank loans with preferential terms
Energy resource seeking – oil, gas, mining
Financial factors – bankrupting firms sold at cheap price, access to international fund (with low interest), to avoid trade quotas, money laundering
Knowledge and know-how seeking – to acquire technology and management know-how through M&As and JVs in R&D centres
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Motives of Chinese firms investing abroad (cont…)
Brand name product building – to form strategic alliance (often through acquisitions) with well-known western firms to overcome poor image of Chinese products
Market access – to gain access to well-connected distribution networks (often through partnership with reputable firms in the West)
Aspiration to be international players, e.g. SAIC, Haier
Increased competition or reduced demands at home – need to seek overseas market (e.g. bicycles, cars, household electronic goods)
Expansion and support of export – setting up branch offices and services centres, establishing a presence in the market
Foreign exchange reserves – if the company makes a profit
Fang Lee Cooke, MBS, UK ANBS Fellow, Australia
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Case study of a leading Chinese IT MNC – Huawei Technologies Ltd
Established in 1988 as an IT product trading firm in Shenzhen
Internationalization drive since 2001, now serving ¾ of the top 50 IT operators in the world
HW has rep offices in over 100 countries and over 1 billion users
Now employing over 60,000 employees, 48% of whom working in R&D
Business strategy: innovation, high quality, low cost, and excellent customer service
Globalization strategy: less developed countries first, then developed countries; occupy market first (loss-making) then make profit through maintenance and upgrades
Motives of overseas expansion: marketing and asset seeking, etc