Economic Transition and Personnel Reforms in China

1. Economic Transition and Personnel Reforms in China Weifang Min Peking University April 20, 2006

2. Introduction To understand current personnel reforms in China, one has to understand the social economic transition of China from an ossified centrally planned economic system to a dynamic market economy, which lead to dramatic changes in human resource mobilization, allocation and utilization.

3. All the major changes in personnel system and personnel policies, such as hiring and firing, staff development and promotion, wage structure, incentive system and mobility, fringe benefits and retirement policies, are related to the economic reform. On the other hand, personnel reforms with new incentive mechanism better motivate and prepare people to participate in the economic and social changes, thus accelerated the social economic transition and development of the country.

4. The Talk Is Divided into Four Parts: Part One:The Economic Transition and the Emerging New Human Resource Model Part Two:The Major Targets of Personnel Reforms: Efficiency, Equity, Transparency Part Three:Schemes and Implementation of Personnel Reform Part Four:Current Challenges and Future Trends

5. Part One • The Economic Transition and the Emerging New Human Resource Model

6. It was recognized that the old model of the human resource, personnel and wage system of the centrally planned economy has been very inefficient, resulted in huge wastage of human resources, especially the high level human resources. E.g. • It was also recognized that one of the keys for the economic success of China is to convert the heavy population burden into human resources advantages, which needs a change. • Thus the most important reform is the changing social economic and institutional context in which the human resource model and personnel system changed fundamentally .

7. The nature of the human resource model and personnel system of the centrally planned economy: Human resources were developed, allocated and utilized according to the governmental plan, and everybody was regarded as an element of production of the centrally planned economy.

8. Human Resources Plan Schools, Univ. and Training institutes Curriculum and Training Plan by Govt. Job Assignment Plan Graduates and Trainees Allocated and Utilized in Workplace Figure 3 . The Human Resource Model in the Centrally Planned Economy Governmental Economic and Social Development Plan

9. Along with the economic reform and opening up to outside world, it was clearly stated by the Chinese leadership that in the market economy, it is the market demands and supply that will play a fundamental role in resource mobilization, allocation and utilization, including human resources. Thus a new human resource model is gradually taking its shape.

10. expected benefit from qualifications family income total demand State employment & Wage policy DEMAND FOR TRAINING & EDU. Wage structure by edu. tra. Qualif. SCH. UNIV. & TRAINING INST. LABOR MARKET SUPPLY COLLEGE GRADUATES state allocation for education and training Social and industry contribution MACROECONOMIC SITUATION AND POLICIES Figure 4 The New Human Model in the New Market Economy LABOR MARKET DEMAND

11. Part Two • The Major Targets of Personnel Reforms: Efficiency, Equity, Transparency

12. Efficiency • The best people for the best jobs • All the people get appropriate positions which better fit in with their qualifications and situations, in order to best use their knowledge and skills.

13. Equity • Equal opportunities for competitions for everybody • Special considerations for the disadvantaged groups • Fairness to everybody emphasized: to the good workers and not so good workers

14. Transparency • Make the recruiting, evaluating, and promoting process all transparent to everyone. • Let everybody participate into the process of changes. • Make everybody understand the rules of the game

15. Some Basic Guidelines for the Personnel Reforms

16. 废止终身制的“铁饭碗”和平均主义的“大锅饭”From “the Iron Rice Bowl” to competitive selection and promotion and a new tenure system

17. 择优扶重: Selecting and retaining the top talents and giving support to those in priority positions • 奖勤罚懒: Encourage and reward the diligent, and punish the indolent

18. 多劳多得: Work more make more. 优劳优酬: Merit pay for excellence

19. 鼓励竞争: Encourage sense of competitiveness • 促进流动: Facilitate mobility

20. 能上能下: Be able to be promoted and demoted • 能进能出: Be able to be get in and get out. Hire and Fire

21. Part Three • Schemes and Implementation of Personnel Reform: • The PKU scheme • Other universities scheme • The schemes of public sector in general

22. 1, Screening, Selection, promotion and tenure • Initial Selection • 2 or 3 three-year appointments • Limited the number of times for applying for promotion • Evaluation and promotion: peer review and outsiders review • Avoid Inbreeding of faculty members: recruitment from oversea universities and sending existing teachers and researchers to international universities

23. 2, New Wage and Subsidies System: 9 level merit pay • 9 level subsidies for performance and positions: A1 A2 A3, B1 B2 B3, C1 C2 C3. • Levels of subsidies not based on the title, but on the performance • Top-down allocation of #of positions • Bottom-up process of evaluation

24. Other Universities Scheme: e.g. in a central China U: “全部就地卧倒”：　Everybody fired and rehired according to their qualifications and performance. • Public sector in general

25. Part Four • Current Challenges and Future Trends

26. Current challenges • Strong resistance: Reform is a process of changing the structure of the distribution of interests. There was, is, will be never a real reform that everybody applauds. • Difficult to balance efficiency and equity. • A society of harmony and complaints of too many and too fast changes • Imperfect legal infrastructure

27. Future Trends • The personnel reform will be proceeded wave by wave with rhythm. • Perfect the legal infrastructure • The reforms of Personnel system will be Institutionalized • Challenges of entering into WTO