This measure was introduced by the Chinese government to ease the re-employment of workers made redundant in the wake of the decision to put state enterprises on a profitable footing.

The recent decision by the Chinese government to change the economic system and adopt a socialist market economy has been a severe shock for the entire sphere of employment. As a result the government has been obliged to give top priority to employment in the coming years.

As of May 1998 all employment-related institutions - and especially the system of labour management - have been geared up for action. They have been given ambitious targets for the re-employment of workers who have lost their jobs in the context of collective redundancies.

Once the Chinese government had taken the decision, in September 1997, to transform most of its large and medium-sized state-owned enterprises into profitable concerns within a three-year period, it also had to change the rules whereby they were managed. The measures adopted to help them overcome their critical condition involved supporting mergers, allowing bankruptcies to take place, allowing the employees to be dismissed and guided into new jobs, the introduction of competition through job losses and the pursuit of profit, and finally, an improvement of re-employment programmes - all in pursuit of a competitive system in which only the best enterprises would survive.

Deeply concerned to preserve a minimum of social security protection and to establish re-employment programmes for redundant workers, in May 1998 the government called on all levels of government to give top priority to the re-employment of redundant workers. In an official document dated 9 June 1998 entitled 'Notice of the Central Committee of the Chinese Communist Party and the State Council concerning the special attention to be paid to basic social security protection and to the re-employment of redundant workers' (Zhongfa, 1998, no. 10) the government established a set of targets to be achieved in the years to come:

the number of redundant workers re-employed each year should exceed the number made redundant in that year;
during 1998, 50 per cent of the workers already made redundant (before 1998) and 50 percent of those made redundant during that year were to find new jobs;
within five years a social security system and an employment service adapted to the socialist market economy was to be created;

The scale of the task

This decision has vast implications. It concerns the entire country, it is a challenge to the management of enterprises as a whole, and especially the management of human resources, and it threatens with exclusion a large part of the country's labour force on account of their inadequate skills.

Redundancies arising from enterprise reorganization in order to achieve profitability are spread across the entire country, including both industrialized and less advanced regions. The number of workers affected is vast: 6,3 million redundant workers, or 8.8 per cent of the total number of state-owned enterprise workers. It is therefore a widespread economic problem and one which furthermore is set to worsen during the next three years, until 2000, but although all areas of economic activity will be affected, some, such as trade and industry will be particularly badly hit.

In centrally planned economies, the compulsion imposed on enterprises by the government to employ more than the necessary number of staff, without reference to profitability led to over-employment, and China, as a country where the supply of labour exceeded demand, was no exception. The clash between this over-employment and the market economy's requirement that each workers should operate efficiently, led inevitably to an imbalance between staffing needs and actual enterprise employment levels. Another contributory factor was the need for enterprises to improve and diversify their output to face competition, which when combined with changes in industrial structure led to a need for a different and more highly skilled workforce.

If enterprises had to dismiss workers, those workers had to find new jobs. But, accustomed as they have been to a planned economy where unemployment was unknown these people - especially the women among them - were faced with serious psychological difficulties in the face of their dismissal, fearing a decline in the esteem accorded to them by others and fearing also that they might lose their next job. As a result such persons experienced a degree of psychological vulnerability and became unsuited to taking on a new job. Furthermore, their skills, learnt in industry, tended to be low-level, outdated and over-specialized, thus hindering their mobility. Most of them were women and older workers who could offer little in the way of comparative advantages (skills) in the 'new' labour market.

The measures envisaged by the government, therefore, are aimed at workers who, after three months no longer have a job, but have not been redeployed or re-employed for reasons related to the production and operation of their enterprise of origin, and have retained an employment relationship with that enterprise. They come mostly from state enterprises or collectively owned municipal enterprises.

In the light of the vast number of people made redundant and the weakness of the support system, plus the inappropriateness of the insurance system and social assistance available to help them deal with the situation, re-employment has become a colossal task requiring mobilization of efforts on a comprehensive scale.

Intervention strategies

At the national level the Ministry of Labour and Social Security (MLSS) and the State Economics and Trade Committee have been made responsible for the implementation of new policies. All local government bodies are empowered to set up similar institutions.

Overall, the role of the State is to encourage initiatives in all Ministries and social organizations. The global strategy adopted has the following implications:

the strengthening of the leading role to be played by certain bodies such as the MLSS;
the creation of re-employment centres in enterprises where redundancies are taking place;
strengthened support for re-employment policies for persons made redundant through:
- accelerated development of the economy as a whole and the opening up of new employment sectors;
- the development of the tertiary sector;
- the development of small and medium enterprises especially through expanded bank credit;
- the development of private enterprise and self-employment;
- encouragement of profitable enterprises to hire redundant workers;
acceleration of the reform process in the system of social security (unemployment insurance, old age pensions, minimum wage etc.);
improvement of employment services and strengthening of training programmes for re-employment.

The role of the main actors

The scale of the changes and the breadth of the actions to be undertaken require the involvement of all actors (political, economic and social) of the Ministries involved with the redundancy issue. In the spheres related directly to labour management, especially with employment, new practices have had to be adopted.

As the Ministry jointly responsible for the operation as a whole, the MLSS has been charged to undertake the following:

ensure the involvement of other Ministries and Departments whose activities are related to the process. This means collaborating with them and also co-ordinating directly the drawing up of policy and drafting of the corresponding legislation. For example, the policy of enhancing the management of redundancies and the operation of Post-Redundancy Re-employment Training Centres has been jointly drawn up by:

the MLSS itself;
the State Committee for Economics and Trade;
the Ministry of Finance;
the National Statistical Office;
the National Trade Union Federation;

undertake concrete employment measures such as:

the establishment of policy concerning minimal standards of living , social insurance and re-employment;
organizing and co-ordinating the development of policies in local-level Departments of Labour and Social Security;
ensuring the proper functioning of labour relations;
working towards a solution of the social insurance problem through a reform of the principles and practical operations of the labour market;
ensure speedy re-employment of redundant staff through occupational information programmes, and job placement and induction services;
encouraging enterprises to create favourable conditions for the hiring of redundant staff; and
encouraging people made redundant to themselves look for jobs in the framework of the measures proposed.

In the rush of initiatives and directives from the central government concerning re-employment policies and measures or any other available assistance, local governments have also undertaken at their level a series of measures to encourage re-employment in accordance with local needs.

Provincial and municipal governments have set up specific working groups to clarify the responsibilities of all departments. Given the importance of the operation, these groups are placed under the highest political authority, namely the Governor or the Mayor. For example, following the lead of the changes made to the National Statistical System by the MLSS, they have changed the provincial and municipal statistical systems, thus enabling them to undertake studies and research at all levels of government. Provincial and municipal governments have also set up their own training programmes and several municipalities have set up special employment services to speed up re-employment.

At the enterprise level the trade unions have immediately joined in consultative processes concerning redundancy proposals. In general, they have joined with Women's and Young People's Federations so as to present proposals to the various levels of government. In particular they have set up training courses dealing with changing attitudes and ways of thinking among redundant workers, and have set up job placement services and psychological support courses for the transitional period.

All state enterprises who make workers redundant are obliged to set up re-employment service centres. Profit-making enterprises finance themselves all projects of concern to them while loss-making ones can apply for state co-financing, whereby the Ministry of Finance and local sources such as the unemployment fund each provide one third, while the enterprise which is making workers redundant must provide the remaining third. In the worst affected areas, the government makes additional special assistance available.

The responsibilities of the Re-employment Centres within enterprises are as follows:

to make a social benefit payment equivalent at least to the level of unemployment insurance payments to persons made redundant. After three years of unemployment redundant staff lose their employment relationship with the enterprise and are entitled to unemployment insurance or social assistance, depending on the case;
to pay old-age insurance;
to pay health insurance;
to pay unemployment insurance;
to provide occupational information or re-employment training programmes;
to monitor the progress of redundant staff and to help them to find a new job.

Impact of the measures

This is still too recent and vast an experiment (dating from only May 1998) to be evaluated. So far all that has been achieved is the mobilization of the actors concerned.

The overwhelming majority of redundant staff have registered with their enterprises' Re-employment Centres, thus entitling them to the various benefits available. They have taken part in the courses on offer and, after receiving guidance and information, have started their own businesses or have themselves looked for a job.

Most of the people over forty years of age who have been made redundant have taken advantage of the retirement arrangements on offer.

When an evaluation is undertaken, the government's objectives concerning the number of people who ought to be re-employed, for example in 1998, should be taken as points of reference, as should the target period of five years. for the intended reforms of social security and of the employment service.

A few numbers produced by the tightly targeted programmes give some idea of the activities undertaken in the wake of the measures adopted:

there has been a 20 per cent increase in the rate of re-employment in one municipality as a result of the organization of training courses;
by the end of August 1998 more than 85 per cent of those made redundant in the whole country had registered with a Re-employment Service and had received their basic benefit;
by the end of August 1998 more than 4.5 million redundant staff had joined private firms.