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Active labour market policies in China – towards improved labour protection? a

Chris K.C. Chan & Yujian Zhai



Department of Applied Social Studies, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong b

Labour and Social Security Laws Research Institute, Shenzhen University, Shenzhen, China Version of record first published: 20 Feb 2013.

To cite this article: Chris K.C. Chan & Yujian Zhai (2013): Active labour market policies in China – towards improved labour protection?, Journal of Asian Public Policy, 6:1, 10-25 To link to this article:

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Journal of Asian Public Policy, 2013 Vol. 6, No. 1, 10–25,

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RESEARCH ARTICLE Active labour market policies in China – towards improved labour protection? Chris K.C. Chana* and Yujian Zhaib a

Department of Applied Social Studies, City University of Hong Kong, Tat Chee Avenue, Kowloon, Hong Kong; b Labour and Social Security Laws Research Institute, Shenzhen University, Shenzhen, China This article offers a critical evaluation of the development of labour market policies in China. It argues that although active labour market policies (ALMPs) in China have been extended in response to the changing labour market and emerging labour conflicts, they have not replaced passive labour market policies (PLMPs). While the laid-off state-owned enterprise (SOE) workers’ protests have compelled the government to introduce ALMPs targeting the SOE workers in the 1990s, protection of rural-to-urban migrant workers is minimal. In recent years, however, both ALMPs and PLMPs have been extended to migrant workers due to the recurrence of labour shortages. This, however, has led to new problems such as the massive exploitation of student interns. The impact of ALMPs on the migrant workers’ rights is uncertain due to the patchy implementation and a lack of monitoring to policies enforcement. Keywords: China; labour; active labour market policies; workfare; social security; student interns

Introduction In the past two decades, active labour market policies (ALMPs) have been widely adopted in developed capitalist countries, especially OECD countries, to combat unemployment and economic inactivity. They are a response to the failure of passive labour market policies (PLMPs) that had been used to compensate for the loss of job opportunities caused by industrial relocation to the developing world. By the mid-1980s, European policy-makers were trying to halt the constant expansion of PLMPs and to encourage ALMPs (Daguerre and Etherington 2009). China, a global manufacturing centre that is still undergoing rapid industrialization, has a very different socio-economic context than that of the Western countries. Still, the Chinese government too has adopted ALMP measures in recent decades to tackle the country’s labour and employment problems. This article provides a critical review of the context, development and impact of the ALMP measures in China in the past two decades. It is argued that ALMPs in China have been initiated and extended in response to the changing labour market and emerging labour conflicts, but they have not replaced PLMPs. The impact of ALMPs on workers’ rights is uncertain due to the patchy of implementation in the local contexts and a lack of monitoring to enforce the policies. *Corresponding author. Email: [email protected] © 2013 Taylor & Francis

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After describing the basic characteristics of the labour market in China, we will analyse evolving employment problems and the government’s decision to adopt ALMPs alongside PLMPs. We will then evaluate the new AMLP initiatives, focusing on the rise of vocational training and student interns.

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China’s expanding labour market In China, employment has always been the main concern of the government, and solving unemployment problems is considered to be the key to maintaining social stability and economic growth. At the time of the introduction of economic reforms in 1978, the total number of employed workers in China was 40,152 million – 41.7% of total population. The workforce continued to grow in the post-reform era. This article focuses on the situation after 2000. As shown in Table 1, the total employment rose steadily from 2000 to 2009. Since China’s economic reform, its financial structure has been undergoing constant changes, which are reflected in the employment situation. Table 2 shows the number of those employed in primary, secondary and tertiary industries in the past decade. Employment in primary industries as a percentage of the country’s total employment Table 1.

The total number of employed persons.


Number of employed persons (1000)

Urban employees (1000)

Rural employees (1000)

Total population (%)

Employment growth (%)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

720,850 730,250 737,400 744,320 752,000 758,250 764,000 769,900 774,800 779,950

231,510 239,400 247,800 256,390 264,760 273,310 283,100 293,500 302,100 311,200

489,340 490,850 489,600 487,930 487,240 484,940 480,900 476,400 472,700 468,750

56.90 57.20 57.40 57.60 57.90 58.00 58.12 58.27 58.34 58.43

0.80 1.30 0.98 0.94 1.03 0.83 0.79 0.77 0.64 0.66

Source: National Bureau of Statistics of China, various years.

Table 2.

Employment in primary, secondary and tertiary industries.


Primary industries

Overall employment (%)

Secondary industries

Overall employment (%)

Tertiary industries

Overall employment (%)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

360,430 365,130 368,700 365,460 352,690 339,700 325,610 314,440 306,540 297,080

50.0 50.0 50.0 49.1 46.9 44.8 42.6 40.8 39.6 38.1

162,190 162,840 157,800 160,770 169,200 180,840 192,250 206,290 211,090 216,840

22.5 22.3 21.4 21.6 22.5 23.8 25.2 26.8 27.2 27.8

198,230 202,280 210,900 218,090 230,110 237,710 246,140 249,170 257,170 266,030

27.5 27.7 28.6 29.3 30.6 31.4 32.2 32.4 33.2 34.1

Notes: Units: 1000 persons, %. Source: National Bureau of Statistics of China, various years.

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declined from 50% in 2000 to 38.1% in 2009. Employment in secondary industries experienced a slight decline from 2000 to 2003, but has risen since 2004. Employment in tertiary industries has been constantly growing, driven in part by the increasing demands of consumers and enterprises. It is evident that the secondary and tertiary industries have absorbed more of the labour force over time while the employment in primary industries is shrinking. China’s economic reform has been characterized by the privatization of state-owned enterprises (SOEs) and the substantial flow of foreign investment to the private sector. This has led to an increase in employment. As shown in Table 3, while jobs in SOEs and collectively owned enterprises (COEs) have decreased, those in foreign-owned and private domestic enterprises have soared. Recently, there is an emerging trend of flexible employment, including dispatch work, contract work, part-time work and self-employment. In short, the labour market in China is in the process of expanding, a stark contrast to the situation in other East-Asian countries. An increasing number of job opportunities are available in the prosperous private sectors, though the number of jobs in SOEs and urban COEs has been reduced. Secondary and tertiary industries are experiencing consistent and rapid growth, which accounts for the increase in employment despite the reduction in primary industries. In terms of unemployment rate in China, as shown in Table 4, in the 2000s, it has hovered at a low level of around 4%. The accuracy of the Labour Bureau’s reported urban unemployment rate, however, has long been criticized because the rate only includes those who have urban household registration (hukou) and who actively register themselves with the government as unemployed. Given these omissions in the official unemployment rate, some academic institutes have released unemployment rates based on surveys they have conducted. For example, in the December 2008 Social Blue Paper, the Chinese Academy of Social Sciences maintained that the urban unemployment rate had climbed to 9.4% (China Economy Weekly 5 January 2009). Table 3.

Composition of urban employment by ownership. Composition (Total = 100)


Total (Unit: 10,000 persons)

Stateowned units

Collectiveowned units

Other ownership units

Stateowned units

Collectiveowned units

Other ownership units

1978 1980 1985 1990 1995 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

9499 10, 444 12, 358 14, 059 15, 301 11, 612 11, 166 10, 985 10, 970 11, 099 11, 404 11, 713 12,024 12,193 12,573

7451 8019 8990 10, 346 11, 261 8102 7640 7163 6876 6710 6488 6430 6424 6447 6420

2048 2425 3324 3549 3147 1499 1291 1122 1000 897 810 764 718 662 618

− − 44 164 894 2011 2235 2700 3094 3492 4106 4519 4882 5084 5535

78.4 76.8 72.7 73.6 73.6 69.8 68.4 65.2 62.7 60.5 56.9 54.9 53.4 52.9 51.1

21.6 23.2 26.9 25.2 20.6 12.9 11.6 10.2 9.1 8.1 7.1 6.5 6.0 5.4 4.9

− − 0.4 1.2 5.8 17.3 20.0 24.6 28.2 31.5 36.0 38.6 40.6 41.7 44.0

Source: Ministry of Human Resource and Social Security of China, various years.

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Table 4.


The employment and unemployment situation in China.


Number of employed persons (1000)

Employment rate (%)

Number of registered unemployed persons (1000)

Registered urban unemployment rate (%)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

720,850 730,250 737,400 744,320 752,000 758,250 764,000 769,900 774,800 779,950

56.90 57.20 57.40 57.60 57.90 58.00 58.12 58.27 58.34 58.43

5950 6810 7700 8000 8270 8390 8470 8300 8860 9210

3.1 3.6 4.0 4.3 4.2 4.2 4.1 4.0 4.2 4.3

Source: Ministry of Human Resource and Social Security of China, various years.

Changing employment problems in China: from labour surplus to labour shortage Although the official unemployment rate remains low, employment has been a high priority in China after economic reform started in 1978. Since 1987, the public media had started to report the phenomenon of ‘tidal wave of migrant workers’ (Mingong Chao) flooding the train stations of coastal cities after the Chinese New Year (Lee 1998). The problem of labour surplus had become more serious in 1990s. China’s Foreign Direct Investment (FDI) rose from 4.7 billion US dollars in 1991 to 11.3 in 1992 and 26.0 in 1993. During the same period, the hardship of rural lives in inland provinces such as Sichuan and Guizhou forced more peasants to move to Guangdong to look for work. According to official estimates, the number of migrant workers in Guangdong was around 10 million in 1993 (Lee 1998, p. 68). The number of inter-provincial migrant workers in the mid-1990s was estimated to be at least 12.5 times that of the early 1980s. Meanwhile, the privatization of SOEs since the mid-1990s had also led to the layoffs of millions of workers (Cooke 2005, p. 1). From 1996 to 2001, 26 million or 40.5% of manufacturing jobs were lost (Jiang 2004). As Ngok et al. (2011, p. 18) note, the number of redundant workers (xiagang) rose to 28.18 million. Anti-privatization protests erupted as SOE workers demanded better compensation and questioned business ownership (Chen 2000, 2003, Hurst and O’Brien 2002, Cai 2006). The xiagang joined the peasants to compete for the jobs provided by joint ventures, foreigninvested enterprises (FIEs) and Privately-owned enterprises (POEs) in the coastal cities. The labour market suffered from an unprecedented reversal: the ability to absorb rural and laid-off labourers in the cities and the incomes in rural areas both declined (Bai et al. 2002). The growth rate of FDI declined after 1994 and fell by 11.2% in 1999 alone due to the Asian financial crisis. Since 2000, the number of rural-urban migrant workers most of whom work in the POEs and FIEs has escalated dramatically while that of state and collective owned enterprise workers significantly declined (see Table 3). The national census in 2000 showed that the number of rural-urban migrant workers was close to 120 million and accounted for 57.5% of the manufacturing workforce (Lee 2007, p. 6). In 2009, the number of rural-urban migrant workers jumped to approximately 230 million according to a state council report (Yang 2010). Most of the boom in manufacturing has taken place in the labour-intensive and export-oriented light industries in the coastal regions, especially the Pearl River Delta (PRD) and the Yangtze River Delta. This change in the labour market took place in the context of China joined WTO in 2001 and a series of socio-economic reform introduced under the Hu-Wen’s regime since


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Table 5. Foreign direct investment in China, 1990–2005. Year

Utilized FDI (US$ billions)

Change from previous year (%)

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

3.5 4.4 11.0 27.5 33.8 37.5 41.4 45.2 45.5 40.4 40.8 46.9 52.7 53.5 60.6 72.4 69.5 82.7 92.4 900.3 105.7 116.0

+3 +26 +150 +150 +23 +11 +9 +8 +1 −11.2 +0.94 +14.9 +12.4 +1.5 +13.3 +19.42 −4.06 +13.8 +23.58 −2.56 +17.44 +9.72

Source: Ministry of Commerce, various years.

2003. The growth rate of FDI inflow, which had been in decline since 1994, returned to double digits: 14.9% in 2001, 12.4% in 2002 and 13.3% in 2004 (Table 5). Since 2003, China has surpassed the United States to become the country with most FDI inflow in the world. Between 2003 and global economic recession in 2008 were a period of particularly rapid growth in exports. According to the World Bank, Chinese exports of goods and services as a per cent of the GDP jumped from 23% in 2003 to 42% in 2007 (World Bank 2011). In short, the economic landscape changed significantly after 2003. This economic context was reinforced by the political development in the country. Hu Jintao and Wen Jiabao took power in 2003 and introduced a series of socio-economic reforms, focusing on the protection of peasants and peasants-workers. At the beginning of 2004, the CCP Central Committee and the State Council issued a No. 1 Document entitled ‘Opinions on Policies for Facilitating Increases in Farmers’ Incomes’. The problems of san nong (peasants, rural villages and agriculture) were addressed in the party’s No. 1 Documents for 7 years thereafter (Xinhua Net 1 February 2010). Although the policies focused on the stabilization of food production, increases in farmers’ income and the creation of an infrastructure in rural villages, they also highlighted the rights and interests of peasant-workers. For example, in 2004, the No. 1 Document stated that ‘peasant-workers are an important component of production workers’ and hence deserved state protection and basic civil rights. Peasant migrant workers, who worked primarily in FIEs and POEs, replaced state workers as the key beneficiaries of the state’s employment and welfare policies.1 The dramatic changes in both the urban economy (rapid growth driven by export-oriented manufacturing) and the rural economy (improvements in socio-economic conditions under the state’s new policy direction) have given rise to a new phenomenon

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since 2003 – a shortage of labour (Mingong Huang) – which is in stark contrast to the ‘tidal wave of peasant workers’ (Mingong Chao) of the early 1990s. Surveys conducted by the Ministry of Labour and Social Security (MOLSS) revealed that 13% more migrant workers had been employed in 2004 than in 2003 (Nanfang Zhoumo 15 July 2004). But an official source revealed that there was a shortage of at least a million person in the PRD and 300,000-person shortage in Shenzhen (Nanfang Zhoumo 9 September 2004). The sudden labour shortage, as we noted, had political and economic causes, and it bred labour activism in China. Since 2004, there have been a series of semi-organized strikes, especially in export-oriented industrial areas such as Shenzhen and its surrounding cities (Chan 2010). It was against this backdrop that the state undertook to strengthen its workplace regulations and legislate better labour rights. Three new labour laws were passed in 2007: the Employment Promotion Law, the Labour Dispute Mediation and Arbitration Law and the Labour Contract Law. The Employment Promotion Law provides the local authorities with guidelines on monitoring employment agencies and facilitating occupational training. The Labour Dispute Mediation and Arbitration Law simplifies the legal procedures of mediation and arbitration and reduces workers’ loss of time and money. The Labour Contract Law seeks to stabilize and regulate employment relations by making written contracts a legal obligation for employers. In 2010, the Social Insurance Law was also passed, providing a basic social security net for the whole population. Two of the new laws (the Labour Contract Law and the Labour Dispute Mediation and Arbitration Law) aim to regulate workplace relations and limit labour conflict. The other two (the Employment Promotion Law and the Social Insurance Law) address problems in the broader labour market. The protection provided under the Social Insurance Law represents a PLMP, while the Employment Promotion Law promotes ALMPs.

From PLMPs to AMLPs: changing labour market policies in China PLMPs since the 1980s Before 1979, the Chinese government guaranteed full employment in urban China under the planned economy and danwei (work unit) system. All able-bodied citizens were assigned a lifetime job in a danwei, and the danwei would provide ‘cradle-to-grave’ welfare for its employees and their families, which covered housing, education, health care, retirement and other work-related benefits (Ding and Warner 2001), although this welfare protection did not cover the rural residents. Since the mid-1990s, however, the fullemployment and the socialist welfare system have come to an end, and unemployment has become a major problem (Ngok et al. 2011). The Chinese government then created a new welfare system to replace the eroding ‘socialist’ system. The new system has developed piecemeal, through various programmes of social insurance, social assistance and social welfare services (Ngok et al. 2011, p. 17). In 1986, the State Council passed Regulations on Unemployment Insurance for Staff and Workers of SOEs to guide the implementation of labour contracts by SOEs. For the first time, China established unemployment insurance for the employees of SOEs. In 1993, the State Council amended the regulations and expanded their coverage: SOEs were required to establish an unemployment insurance fund that would guarantee a basic living allowance for unemployed workers. In recent years, the number of persons covered by unemployment insurance has continued to increase. In the late 1990s, the ‘three guarantees’ system was implemented, consisting of a guarantee of a basic subsistence allowance for laid-off employees of SOEs, a guarantee of unemployment insurance and a guarantee of a minimum subsistence allowance for urban

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residents. While the above measures only protect urban workers (particularly those laid off by SOEs), the protection has been extended to migrant workers in recent years, through legislation such as the Social Insurance Law. As indicated in Tables 6 and 7, while the number of unemployment insurance contributors has increased steadily since 2000, the total expenditure for the five types of social insurance has risen much more dramatically. For example, the total expenditure on pensions was 211.55 billion in 2000 and 889.44 billion in 2009. Although the implementation of the new Social Insurance Law is still uncertain, the total expenditure for social security is expected to increase in coming years. Today, under the 2011 Social Insurance Law, social insurance covers old age, unemployment, health care, maternity leave and work-related injuries. Social assistance and social welfare programmes also provide assistance to the poor and marginal citizens in urban, including the disabled, so that they can maintain a basic standard of living. These policies represent an expansion of PLMPs initiated in the early stages of

Table 6. Unemployment insurance contributors in China. Year

Contributors (1000 persons)

Proportion of total employed persons (%)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

103,260 103,550 101,820 103,730 105,840 106,480 111,870 116,450 124,000 127,150 133,760

14.51 14.18 13.81 13.94 14.07 14.04 14.64 15.13 16.00 16.30 16.90

Source: Ministry of Human Resource and Social Security of China, various years.

Table 7.

Social security expenditure, 2000–2009.


Basic pension

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

2115.5 2321.3 2842.9 3122.1 3502.1 4040.3 4896.7 5964.9 7389.6 8894.4

Basic medical Unemployment insurance for insurance premium urban employees 123.4 156.6 186.6 199.8 211.0 206.9 198.0 217.7 253.5 366.8

124.5 244.1 409.4 653.9 862.2 1078.7 1276.7 1561.8 2083.6 2797.4

Work injury insurance

Maternity leave

13.8 16.5 19.9 27.1 33.3 47.5 68.5 87.9 126.9 155.7

8.3 9.6 12.8 13.5 18.8 27.4 37.5 55.6 71.5 88.3

Notes: All expenditures were from the social security funds. Unit: 100 million yuan. Source: Ministry of Human Resource and Social Security of China, various years.

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China’s industrialization (similar to PLMPs introduced in Western capitalist countries in late-nineteenth and early-twentieth century). However, PLMP measures alone cannot solve China’s unemployment problem.

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ALMP measures since the early 2000s In order to promote employment, the Chinese government has implemented a series of policies that address the changes of the labour market. Since 2002, China has adopted the principles of ‘workers finding their own jobs, employment through market regulation and employment promoted by the government’.2 The government’s proactive employment policy can be divided into three phases. First, re-employment services were established in the 1990s for laid-off SOE workers. By the end of 1998, 6.04 million people were using these services, 6.10 million had been re-employed under their auspices, and the rate of re-employment had reached 50% (Mo 2004). The second phase of the proactive employment policy was the introduction of more ALMPs, beginning in the early 2000s. These policies are intended to develop the economy, adjust its structure, create jobs, improve the public employment service (PES) system, develop the labour market, promote re-employment of laid-off workers and improve the social security system to maintain harmonious and stable labour relations. Since 2001, Re-employment Assistance Action has been implemented throughout the country. It provides various forms of assistance to laid-off workers, from basic subsistence allowances to employment assistance. For those who have difficulty in finding a job, it provides opportunities in public service, one-to-one vocational guidance and free re-employment training. By the end of 2005, the number of ALMPs had increased, and included reductions of taxes and administrative charges, the provision of small security-backed loans, social insurance subsidies, employment assistance, employment services, job training, financial backing, social security and the regulation of unemployment. From 2000 to 2003, the main targets of employment expenditure were laid-off workers, including those laid off from SOEs and from closed or bankrupted businesses, as well as other unemployed people with urban household registration who were entitled to the minimum subsistence allowance and had been unemployed for more than 1 year. From 2003 to 2006, the re-employment policies were shown to be effective: on average, there were nearly 10 million new employees each year (a three-million person per annum increase over the rate in the late 1990s). In the course of 4 years, 20 million laid-off (xiagang) workers from state and collective owned enterprises were re-employed (the other half of the new employees were non-xiagang workers). Since 2003, rural workers have been permitted to pursue employment in cities, and businesses no longer need to apply for permission to employ rural workers, nor do they need to restrict the types of work available to migrant workers. Meanwhile, various measures have been taken to regulate unemployment. The registered urban unemployment rate has been steadily declining (4.3%, 4.2%, 4.2% and 4.1% in 2003, 2004, 2005 and 2006, respectively).3 The third phase of the proactive employment policy began with the enactment of the Employment Promotion Law, which aims to facilitate employment and re-employment. In 2006, China’s employment initiatives began to target the rural labourers and university graduates. The government-funded Sunshine Project and Spring Wind Action Program, established by the Ministry of Agriculture and the Women’s Federation, provide career


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training and small business loans for migrant workers who have returned to their home villages. This article focuses on two ALMP measures: the PES system and vocational training.

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The PES system The PES system was established to match jobs and job seekers. The number of job seekers who have found employment with the assistance of PES has steadily increased (Tables 8 and 9). Public employment agencies have established service networks at the provincial, municipal, regional and community levels. They offer free employment consultations and provide one-stop services, including job referring, vocational training and guidance and social security services. Information on the labour market is exchanged among more than 100 large- and medium-sized cities. In recent years, labour security offices have been established at the community level. Grassroots PES are available to those who have been laid off. The public employment recommendation services have consolidated and now offer financial information, employment recommendations, vocational guidance and connections to other services providing training and aid. Vocational training In addition to establishing employment agencies, China has introduced tax deductions, employment assistance and vocational training (Table 10). As PES employees often lack relevant experience and skills, they have difficulty in setting objectives and getting their job search underway. Both the central and local governments have provided funding for these ALMPs. The relationship between PLMPs and ALMPs in China As our preceding review has shown, China has followed the lead of post-industrial Europe and the United States in adopting ALMPs as a means of tackling unemployment. However, unlike the Western countries, where ALMPs tend to replace PLMPs, in China, active and passive labour policies have developed in tandem. Chan (2011) attributes the rise of workfare in the West to the government’s attempt to reduce the tax rate and welfare expenditure in a society with an increasing number of seniors and single-parent families. These societies face pressure to reduce taxes in order to avoid capital relocation to developing countries where costs are much lower. At the same time, social changes (high unemployment rates, an aging population) have added new burdens to the traditional welfare regime. It is clear that China is another story: it is in the early stages of industrialization; its socio-economic development is unique; its post-socialist welfare regime is in the process of reconstruction. As a result, the Chinese government has adopted different strategies: it intervenes more actively in the labour market in order to lower production costs and maintain social harmony by achieving a high employment rate. A policy of ‘employment promotion’ (Cujin Jiuye), one would assume, would provide assistance to workers. The central government’s intentions are to boost economic growth and to balance the capital and labour interests. As the following section will argue, however, the example of student interns shows that ALMPs are not always in the interests of workers.

Number of employment agencies at the end of the year

29,024 26,793 26,158 31,109 33,890 35,747 37,450 37,897 37,208 37,123


2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

15,094 18,767 22,502 38,320 35,652 40,389 49,512 55,406 55,070 60,457

Number of employees demanded by registered employers (unit: 1000)

Source: Ministry of Human Resource and Social Security of China, various years.

86 84 85 97 107 111 123 129 127 126

Number of employees in employment agencies at the end of the year (unit: 1000)

National employment agency data.

Table 8.

19,917 24,395 26,842 30,602 35,828 41,289 47,359 49,386 55.320 58.057

Number of registered job seekers (unit: 1000)

9752 12,291 13,543 15,860 18,380 21,653 24,930 26,486 27,643 28,398

Number of successful job matching in the year (unit: 1000)

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Table 9.

C.K.C. Chan and Y. Zhai Job-seeking methods of unemployed urban residents (%).


Register at employment agency office

Ask friends and relatives about jobs

Participate in employment advertise meeting

Answer or advertise

Start up own business

Wait for relocation after layoff


2001 2002 2003 2004 2005 2006 2007 2008 2009

11.6 14.2 17.9 17.1 15.8 12.9 13.6 12.5 11.3

25.4 38.3 36.9 45.1 47.5 50.5 53.1 52.4 53.5

2.3 − − − 6.1 8.0 9.8 2.1 11.6

3.1 1.2 1.0 2.4 0.7 1.3 1.9 9.5 2.6

7.7 7.3 5.9 11.3 10.5 5.5 6.9 7.1 6.0

30.0 18.0 17.5 8.5 − − − − −

19.9 21.0 20.8 15.7 19.4 21.8 14.7 16.4 15.0

Source: Ministry of Human Resource and Social Security of China, various years.

The problem with ALMPs: the case of student interns The exploitation of student interns is an example of the ALMPs’ limitations in China.4 According to the report from CLB (2012), there were more than 9 million student interns and a similar number of graduates from 10,864 secondary vocational schools in the country, including 7700 were operated by local governments, 3123 were run by the private, while the reminding 41 schools were directly affiliated to the central government. The number of privately run vocational schools has jumped rapidly since 2006 (Leung 2011). In 2006, the government voiced its support for the establishment of private vocational schools; by the end of 2008, private vocational schools accounted for 10% of the overall number of vocational schools, and by 2010, the proportion had risen to 28.2%. As analysed earlier, this policy change took place in a context of the rise of ‘the shortage of labour’, the government attempted to increase the supply of skilled labour force. The resultant pool of student interns is a boon to businesses, which have been facing the pressures of rising production costs and labour shortages. In March 2010, the General Office of the Education Bureau issued a ‘Notice Regarding How to Improve the Work of Secondary Vocational School Training to Solve the Shortage of Skilled Workers’ (Leung 2011). However, the unchecked expansion of the vocational schools has led to the exploitation of the young students. Because of increasing labour costs and the serious labour shortages in coastal areas, many businesses in low-cost, low-skilled, labour-intensive industries have used vocational school students as their short-term workers. As will be elaborated below, in the 2010 strike at the Honda plant, in Foshan, Guangdong province, more than 70% of the workers were students; meanwhile, many Foxconn factories were revealed that their proportions of students interns were more than half, while legal maximum is 30%. Some unscrupulous schools demand a rebate for providing interns. There have even been reported cases of vocational schools detaining student’s wages. Labour protection groups identified one school where students were compelled to do four training stints, totalling 24 months, in the course of a 3-year programme, leaving the students with about 6 months of class time (Leung 2011). In other words, the students worked for the ‘school’ rather than learning during their enrolment. The CLB (2012) report also pointed out that the quality of training in the vocational schools was poor, and many graduates ended up with jobs which were unrelated to the training they received. The key problem for student workers is that under the current system, they cannot enjoy the status of employees and are not covered by labour contract, labour laws or social

2001 2002 2003 2004 2005 2006 2007 2008 2009

6.53 7.59 9.96 14.74 15.79 191.6 22.7a 23.0 22.3

0.92 1.86 2.51 4.11 4.54 53.8 67.2 6.1 5.74

Financial subsidies 1.78 2.07 3.27 5.49 5.52 91.4 11.7 13.3 13.92

Vocational training subsidies 3.13 2.98 3.31 4.35 4.91 35.5 34.4 2.8 1.97

Revenue from training programmes 0.69 0.68 0.88 0.82 0.81 10.9 84.9 0.9 0.68

Other revenue

6.18 7.67 9.42 12.73 14.74 176.1 − − −

Total expenditure (100 million yuan)

4,760,494 5,333,426 5,990,485 7,466,895 8,043,752 9,014,039 9,581,041 9,489,569 9,833,527

Number of persons receiving vocational training

2,809,620 3,181,555 3,768,636 4,662,924 5,577,680 6,488,160 7,166,297 7,044,980 6,607,821

Number of persons employed as a result of training programmes

Notes: a The original statistics in the 2008 edition of China Labor Statistics Yearbook which is published by Ministry of Human Resource and Social Security of China shows that the total funding in 2007 is 2,274,161.8 (unit: 100 million yuan). However, this figure is unusually huge and inconsistent with the pattern of statistics in other years. Therefore, the authors trust that it was a typo of unit spelling and the unit should be 10,000 yuan, rather than 100 million yuan. Source: Ministry of Human Resource and Social Security of China, various years.

3571 3465 3307 3323 3289 3212 3173 3019 3332


Total funding (100 million yuan)

Employment training centre data.

Number of employment agencies

Table 10.

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security. The students are usually not paid legal minimum wage, nor are they covered by the social insurance. They also cannot join a trade union. When a legal violation or occupational injury occurs, the local Labour Inspection Bureau does not investigate. It is the Education Bureau’s responsibility to monitor vocational schools, but it has not done so effectively. There are many interns with occupational injuries in the PRD, but they do not qualify for treatment. Although the government demands that schools buy private accident insurance for students during the internship, the insurance is not enough to protect the students (Leung 2011). In the summer of 2010, the Honda strike and the suicides of the workers at Foxconn drew global attention. In both cases, interns represented the majority of the workforce. In some Foxconn factories, student interns were reported to represent more than 50% of the workforce. Student interns are neglected as a result of a legal loophole, and some labour NGOs are currently campaigning to close it (see Leung 2011, CLB 2012). Towards the end of June 2010, Foxconn announced its relocation to the inner province of Henan (China Net 29 June 2010), where the company plans to employ 0.3 million workers. To help the electronics giant recruit a sufficient workforce, the Education Department of Henan issued an ‘urgent notice to organize placements of middle-level vocational school students at Foxconn’ in September 2010. According to media report, 25,000 student workers from over 100 schools in the province were mobilized to work at Foxconn by October (Beijing Youth Daily 12 October 2010). The Chongqing municipal government issued an executive order to all vocational schools, demanding that 60% of their students remain in the city to secure working internships in its high-tech industrial park. Wuhan municipality issued a similar decree (Leung 2011). While Foxconn’s case showed well how the low-waged student interns have been utilized by the local government to attract the global business’ investment, the Honda case5 also perfectly demonstrates the abuse of the student intern system by the business in China. Honda Auto Parts Manufacturing Co., Ltd. (CHAM) in the city of Foshan, Guangdong Province, is solely owned by Honda and was set up in 2007. Since its establishment, all workers in CHAM have been recruited from a small number of technical schools (jixiao) through an internship system. As a normal practice, the final year students of the technical schools in their 3-year programme have to do 1 year’s internship in an industrial organization. After the students’ finally graduate from the school, CHAM will offer the interns a formal employment status. At the time of the strike, workers told us that about 70% to 80% of CHAM’s workers were interns. The strike involved about 1800 workers and lasted for 17 days from May to June 2010. The strikers listed 108 demands to the management. But the most essential demand was pay rise. The monthly salary of interns was around 900 yuan, which is lower than the minimum wage at the time (920 yuan), while the salary of the formal workers was 1544 yuan before strike. They demanded a pay increase of 800 yuan for all. When we conducted our fieldwork in workers’ dormitories on 30 May 2010, the company had escalated its pressure on workers by pushing student interns to sign a document undertaking that they would not lead, organize or participate in any strikes. Moreover, the company also mobilized teachers from the technical schools to persuade the workers to return to work. The second strategy seems to have been effective as some interns were worried that their schools would punish them by keeping their graduation certificates. However, some workers posted leaflets on the wall near the document collection boxes stating that: ‘you are Han traitors if you submit the letter!’ It put many intern students in a paradoxical position. One of the workers told us at mid-night on 31 May: ‘we still don’t know if we will go back to work or not tomorrow.

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If our teachers come with us, it is difficult for us to reject [to work], but we really don’t want to be a Han traitor’. That next morning, many interns resumed work after meeting with the CEO of CHAM, the local government representatives and student interns’ teachers. However, about 40 formal workers refused to work and gathered together in the playground of the factory premises. The afterward development was that a physical conflict took place between strikers and a group of people who claimed themselves as town- and district-level trade union members after the latter failed to persuade, the former went back to work. A few of the strikers were hurt and sent to the hospital. This had attracted vast attention from both the local and international media on ‘Trade union beat workers up’. This incident served as a turning point, after which the company and trade unions came under even greater pressure and sought to resolve the dispute with a stronger initiative, including a better pay package (raising workers’ wages from 1544 to 2044 yuan and interns’ wages from 900 to 1500 yuan), trade union committee re-election and a regular wage bargaining which has been held for 2 years. This is one of the few stories in China that workers’ interests have been enhanced dramatically after the strike. However, if we analyse the process of the strike, it is clear that the use of student interns is the management’s strategy to strengthen their exploitation. First, although they did almost the same work task, the interns’ salaries were less than that of the formal workers by more than 70% (900 vs. 1544 yuan). Second, student interns were easier to be managed because before they formally graduated from the school, they could not quit the job; otherwise they risked losing their school qualification. Third, their teachers at the technical schools played a crucial role in pacifying the workers’ struggles. It should be noted that both the local trade union and government officials could not persuade student interns to return to their work, but their school teachers could. All of these points are on top of the other general unfavourable legal conditions, which have been reviewed earlier, facing the student interns. Conclusion In this article, we showed that, while the Chinese government has actively promoted AMLPs since the 1990s, they have continued to rely on PLMPs. Active and passive labour policies have been formulated and developed in tandem. In the 1990s, China faced the challenge of providing social security and employment for the laid-off SOE workers. In the 2000s, it has faced labour shortages and conflicts of the migrant workers. In both cases, Chinese government responded by promoting vocational training, matching employees with employers and strengthening workers’ entitlement to welfare and protection. In the future, it is likely that both PLMPs and ALMPs will continue to expand in China. A major PLMP – the Social Insurance Law – has recently been implemented since July 2011, which provides basic protection (health care, pensions, maternity leaves, workrelated injury compensation and unemployment benefits) for almost the whole population through contributions from employers, employees and the government. While its implementation is still problematic, it represents an ambitious attempt to construct a welfare regime. ALMPs such as vocational education will continue to receive support, together with PES, in accordance with the 2008 Employment Promotion Law. Some municipality governments may continue to mobilize young migrant workers to work for the global enterprises as they did in the case of Foxconn. They are determined to attract and retain large companies in order to boost the local economy. The student interns are largely utilized by the business to lower down production cost, evade legal responsibility for employees and strengthen control over workers as we see in the case of Honda. It has given rise to protests

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from student workers as well as concern from labour NGOs (Leung 2011, CLB 2012). Therefore, the fate of student interns reveals a large gap between the intention and the implementation of ALMPs in China. While it may be the intention of the central government to promote employment and combat labour shortages by strengthening workers’ legal rights, providing job-search services and promoting vocational training for young migrant workers, these policies have led to new forms of labour abuses in some municipalities as there are no agencies monitoring their local implementation. As a result, AMLPs are not always in the interests of workers. This is important to bear in mind when workfare and AMLPs are presented as the means to tackle employment problems in both the developed and developing countries.

Notes 1. 2. 3. 4. 5.

In the mid-1990s, in order to pacify laid-off SOE workers, the state and All-China Federation of Trade Unions (ACFTU) introduced a series of retraining and welfare programmes to help the urban workers. See Hurst and O’Brien (2002) and Cai (2006). This statement was included in the official documents of the government’s employment policy and also in the Employment Promotion Law of PRC in 2008. The data in this section were taken from the website of the MOLSS, PRC (Develop labor security affairs, enhance people’s welfare: Tian Chenping’s speech on the main achievement in social security from the Sixteenth National Congress). See Tian (2007). This section is based on the work of Liang (2011) and an analysis report from CLB (2012). Miss Liang is a labour NGO project officer who is responsible for a student intern’s organizing project. CLB is a Hong Kong-based NGO that advocates for workers’ rights in China. This is based on the first author’s fieldwork. For the detail of the Honda case, see Chan and Hui (2012).

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