turbulence and upheaval over the decade or so following the laying down of
these foundations. China was turned ‘upside down’ by the ebb and flow of
radical change which occurred at that time, during the ten years of Cultural
Revolution (1966–1976), which was led by the CCP Chairman Mao Zedong in
an attempt to remove the party from the influence of the bourgeoisie (mainly
intellectuals). At the end of the Cultural Revolution, the Chinese economy was
nearly bankrupt: almost 100 million people had barely enough food and cloth-
ing, the level of enterprise performance was weak and unlikely to improve
greatly under a system in which the workers were not strongly motivated (Zhu
and Warner, 2000).
The year 1976 marked the end of an era: Mao Zedong died. In order to
develop the economy and achieve the goal of ‘modernisation’, under the new
leadership of Deng Xiao-ping, China adopted economic reform and an ‘open
door’ policy for foreign investment and international trade (Zhu and Warner,
2000). Both Western technology and management systems and the Japanese pat-
tern of economic development and management were encouraged as models to be
transferred into Chinese economic and management systems (see Child, 1994). In
order to understand the transformation of Chinese management systems, we need to
highlight the differences between the pre-reform period and the reform period.
Pre-reform period (1949–1979)
The development of the Chinese system during the pre-reform period was cov-
ered under the so-called ‘Socialist Superiority’ values in the following significant
ways: (1) employment security, seniority, social welfare, and party/management
leadership (central control) were labelled the ‘advantages’ of the ‘socialist system’;
(2) trade unions mainly played a ‘window-dressing’ role but this was explained
away as leading to ‘industrial harmony’; (3) narrow wage differentials were
praised as ‘egalitarian’; (4) life-time employment with a seniority-based wage
system was introduced; (5) the traditional kinship system was modified into a
‘revolutionary’ relationship, as relationships (guanxi) with powerful leaders deter-
mined the path of an individual career; (6) the goals of the work-unit (danwei)
required individual sacrifice not only for the unit but also for the nation;
(7) political interests replaced economic interests as dominating influences in the
Industrial Relations system; (8) as a consequence, workers lost their motivation
for production and both the economic system and management systems col-
lapsed at the end of the Cultural Revolution in 1976.
The reform period (1979–now)
In the reform period, the main task was reforming the IR system and trans-
forming it into a new one embodying employment relations and HRM. New
policies were mainly centred on the reform of wages, employment, welfare and
management. The reforming initiatives of the government have been broadly
defined as breaking the ‘three irons’: ‘iron rice-bowl’ refers to life-time employ-
ment, ‘iron wages’ refers to the fixed wage system, and ‘iron chair’ refers to the
HRM in East Asia 209