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
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
1
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
2
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 jobfor-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
3
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-life
Performance-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
4
Table 1. Employment growth in the private and other forms of
ownership between 1990-1999
Year
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
Average
growth
National
growth
155,100
13,900
11,700
12,500
12,400
11,100
13,300
10,900
5,100
9,000
11,100
State-owned Collective ForeignSelfPrivategrowth (%) ly-owned
owned
employed
owned
growth growth (%) growth (%)
(%)
2.35
1.34
40.43
8.45 1,700,000
3.07
2.23
150.00
9.64 1,840,000
2.11
-0.19
33.94
6.93 2,320,000
0.28
-6.30
30.32
19.12 3,730,000
2.69
-3.18
40.97
28.44 6,480,000
0.42
-4.20
26.35
22.19 9,560,000
-0.15
-4.16
5.26
8.73 11,710,000
-1.78
-4.41
7.59
8.45 13,500,000
-17.98
-31.91
1.03
12.37 17,100,000
-5.37
-12.79
4.26
2.08 20,220,000
-2.06
-7.78
28.07
12.84
Privateowned
growth
(%)
3.66
8.24
26.09
60.78
73.73
47.53
22.49
15.29
26.67
18.25
31.67
Sources: China Statistics Yearbook, 2000; Forty Years of China Industry and
Commerce Administration Management, 2000.
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
5
6
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
6
Employment relations in the new forms of
ownership (cont…)
Foreign-funded businesses, Sino-foreign joint ventures
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
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
7
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
8
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
9
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
10
Table 2. Union membership level in organisations where unions were
established
No. of
grassroots
unions
(1,000 units)
No. of
employees
(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
Year
No. of
Female
employees
(1,000
persons)
Membership
(1,000
persons)
No. of
female
members
(1,000
persons)
Membership
density (%)
No. of fulltime union
officials
(1,000
persons)
Source: adapted from the China Statistics Yearbook 2005, p.777.
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
11
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
12
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
13
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
14
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
Key HR challenges: – retention
– motivation
– management competence
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
15
For years, MNC like Wal-Mart have resisted the call for
union recognition
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
16
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 locationspecific
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
17
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
18
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
19
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
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
20
Huawei Headquarters 总部风光
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
21
Huawei R&D Centre
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
22
Huawei HQ Staff Condominium 员工公寓百草园
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
23
HW’s global HR strategy and challenges in ER
HR strategy:
 Deployment of Chinese expatriate to set up operations first
 Localization to overcome language and cultural problems, also
to show commitment to local economy and observation to local
labour law
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
24
HW’s global HR strategy and challenges in ER (cont…)
HR challenges:
 Retention due to lower pay than western MNCs
 Low competence of employees in poor countries (low PC literacy
and project management skills)
 Cultural differences in work values
 Cross-cultural issues between Chinese expat & local employees
Lack of identification of local employees with HW’s corporate
culture or HW as their employer
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
25
HW’s global HR strategy and challenges in ER (cont…)
HR responses:
 Promote local employees to ranks which they will not get in
western MNCs
 Introducing local practices to suit local employees (e.g. bank
loan guarantee letters)
 Cross-cultural team building through social events
 Sending key local employees to HW’s HQ for training and
development
 Deployment of locals as deputy managers to look after
personnel issues
 Learning by doing in developing HR practices to suit local
needs, e.g. borrow western MNCs’ good HR practices
 Deployment of emotional intelligence in understanding local
employees needs and provide support
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
26
????
Questions?????
………. and answers
Fang Lee Cooke, MBS, UK
ANBS Fellow, Australia
!!!!!!!
27