Flexibility or Commitment: Manpower Strategies under the New Labour Law in China during Financial Tsunami

The Labour Contract Law of People’s Republic of China came into effect in 2008 to supplement the first Labour Law of 1994. The enactment of this law, however, coincided with the outbreak of the world’s financial tsunami at the same time. Many enterprises in China, especially manufacturing factories, faced tremendous difficulties of both the decreasing sales orders from the West and increasing operations costs including labour cost. This article is based on intensive case studies of two manufacturing plants in Dongguan, a manufacturing hub in Guangdong Province. Semi-structured interviews with managers and workers were conducted. The author investigated the changes imposed on the employment policies of the enterprises under the new Labour Contract Law, including the areas of employment contracts, working hours, part-time employment, termination and lay-off, as well as union organization and union’s influence in the firms. The author also investigated the strategic responses adopted by the management of these case firms in managing human resources in this critical period. These firms’ manpower strategies, employment policies and employee relations practices including relationship with the union, etc. were evaluated. Findings show that the small case factory adopted the manpower strategy very similar to the ‘flexible firm’ model (Atkinson 1985). Another larger case factory, which strictly complied with the new legal requirements in employment, adopted the approach similar to the ‘commitment model’ (Walton 1985) in managing human resources and the management was optimistic to the positive outcomes of such approach to the firm.