Highlights
The Labour Law Should not Have Partiality
by ZHANG Shuguang, Chairman of Unirule Academic Committee
Translated by MA Junjie, Researcher, Unirule Institute of Economics
This is an edited synthesis of Professor ZHANG Shuguang’s remarks on the Seminar on Labour Contract Law and the Supply-Side Reform, which was held at Unirule Beijing Office on July 23rd, 2016.
“A critical article in the Labour Contract Law is about open-ended work contracts. This article has different implications for enterprises, depending on their size. Big enterprises are comparatively stable with fixed relations between workers and the market. They are too big to fail, in a sense. To them, this article is important. However, when you look at the small and medium sized enterprises, and when you see how many of them close down every year, the uncertainty and instability is all there. If we adopt the same criteria for both of them, there may be problems,” This statement was made by Professor ZHANG Shuguang at the seminar.
Here are some of the key points made by Professor ZHANG Shuguang at the seminar:
1. It should be a priority to clarify the guidelines for legislation. The labour law should first and foremost protect the interest of the workers. But how should this be done? Should the labour law be partial, or should it strike a balance between all the parties? I think the labour law should not have partiality. The current principles of the labour law failed to do that.
2. Many of our laws have strong principles that do not work in practice. The labour law, on the contrary, is overly explicit in this sense. This has crushed the room for manoeuvres for the market mechanism, where different entities in the market undertake transactions and exchanges, and reach contracts by negotiation and compromises.
3. A unified one-size-for-all law is not acceptable. For example, a critical article in the Labour Law is about open-ended work contracts. This article has different implications for enterprises, depending on their size. Big enterprises are comparatively stable with fixed relations between workers and the market. They are too big to fail, in a sense. To them, this article is important. However, when you look at the small and medium sized enterprises, and when you see how many of them close down every year, the uncertainty and instability is all there. If we adopt the same criteria for both of them, there may be problems.
4. There are some issues that are not targeted by the labour law, but have a lot to do with it. For instance, the current policy of cutting overcapacity and deleveraging aims to eliminate many zombie enterprises. However, there is the issue of managing the layoffs. How are their interests and rights going to be protected? In the first state-owned enterprises reform in the early 1990s, there were millions of layoffs, and they were the ones who paid for that reform. Now we are trying to deal with overcapacity, but how are we going to deal with the layoffs?
Here are Professor ZHANG Shuguang’s remarks:
Good morning, Ladies and Gentlemen! Firstly, allow me to welcome all of you to join us at Unirule for this seminar. Thank you all for coming, despite the hot weather today. The topic of this seminar is labour law, which is a very important law as it balances the interest of the workers and enterprises and further adjusts the labour market. Therefore, it is of key importance to our economic life. The Labour Contract Law was enacted in 2008. There had been debate on it during the legislation and research process. Over the past eight years, many problems have emerged, though the Labour Contract Law has also had some positive effects on the labour market. In the light of the debate, discussion, and controversies over the Labour Contract Law, the authorities have come to recognise the necessity and urgency to modify the Labour Contract Law.
Before that, I think there are a few issues that need to be clarified and discussed. One is the guideline for legislation. The labour law should first and foremost protect the interest of the workers. But how should this be done? Should the labour law be partial, or should it strike a balance between all the parties? I think the labour law should not have partiality. The current principles of the labour law failed to do that. So far, the guideline for drafting the Labour Contract Law is not ideal.
Another issue is that many of our laws have strong principles that do not work in practice. The labour law, on the contrary, is overly explicit in this sense. This has crushed the room for manoeuvres for the market mechanism, where different entities in the market undertake transactions and exchanges, and reach contracts by negotiation and compromises. Therefore, I think a law should be both practical and principle-focused at the same time, so that it can be applied in real life, but also leave room for negotiation. The scope of the market activities should not be compromised by the explicit and strict articles of a law.
Moreover, we should also realise that social life is very complicated and multi-faceted. When it comes to the law, the various situations should be taken into account, instead of getting a one-size-for-all solution. For example, a critical article in the Labour Contract Law is about open-ended work contracts. This article has different implications for enterprises, depending on their size. Big enterprises are comparatively stable with fixed relations between workers and the market. They are too big to fail, in a sense. To them, this article is important. However, when you look at the small and medium sized enterprises, and when you see how many of them close down every year, the uncertainty and instability is all there. If we adopt the same criteria for both of them, there may be problems.
There are some issues that are not targeted by the labour law, but have a lot to do with it. For instance, the current policy of cutting overcapacity and deleveraging aims to eliminate many zombie enterprises. Taking Dongbei Special Steel Group Co., Ltd. for an example, the Liaoning Provincial Government holds 70% of its shares, and it has a staff of over 10,000 with a capacity of 180 trillion ton per year. Such an enterprises is able to get an income of only half of its debt every year. But the government as its largest shareholder does not want it to go bankrupt. The government does more than that: it doesn’t allow the banks to withdraw their loans; neither does it allow banks to push the enterprise for payment. In addition, the government also coerced the stakeholders to utilise one third of the assets to pay back debts, one third of the assets to undertake the debt/equity swap, and another one third for extension of payment time limit. Of course the stakeholders refused to do so. And this enterprise is still faring in troubled waters. In other places in China, there are many coalmines that have been shut down. But the biggest problem there is the settlement of the layoffs. This is a problem faced by all of us. How are their interests and rights going to be protected? In the first state-owned enterprises reform in the early 1990s, there were millions of layoffs, and they were the ones who paid for that reform. Now we are trying to deal with overcapacity, but how are we going to deal with the layoffs?
In this light, I think today’s seminar is very important for the modification and betterment of the Labour Contract Law. I hope that everyone is free to share his or her opinions at this seminar so that we could possibly find a solution for the current issues of the Labour Contract Law. Thank you!
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July 16th, Unirule Western Classics Session 5 was held at Unirule Beijing Office. This session was joined by Professor XUE Zhaofeng from Peking University, and Professor ZHU Haijiu from Zhejiang Gongshang University. The topic was “Monopoly and Competition".
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Unirule 10-D Spatial Simulation Planning Model (SSPM)
The Unirule 10-D Spatial Simulation Planning Model (SSPM) is a mathematical and computational model based on economics. It is developed by a Unirule research team led by Professor SHENG Hong. SSPM is designed to simulate the development scale, economic density, industry distribution, resource constraints, ecological preservation, institutional influence, policy effect, and the evolution process in the next ten to twenty years or even longer period for a region. SSPM provides reference for the regional economic development strategy making, which can be directly adopted in the planning on regional economic development, population, land use, industry development, townships, water and ecology.
So far, SSPM has been adopted in the industry planning of Qianhai Area, Shenzhen, and the economic development planning of Yangcheng County, Shanxi Province.
Learn more about the SSPM
Current Researches/ Consulting
Improving China’s Implimentation and Supervision Institution of the Constitution
At present, research on the implimentation and supervision institution of China’s constitution is insufficient. Multiple problems exist in the current studies, such as the lack of a cultural perspective, and empathetic understanding of China’s political tradition; a lack of authentic Chinese perspective and an indulgence of Westernized framework of analysis; and a lack of reflection of the reality and the existing political framework.
The research on China’s constitution review institution should put the protection of civil rights and constitutional construction first, with a reflection of China’s reality and take in the advantages of external researches. A plausible research approach is as follows: 1. This research ought to provide a right relief mechanism; 2. It should take into account that China is a vast country with imbalanced regional development realities which foster unique and differentiated conceptions of the law and politics in general; 3. It should be built upon the current constitutional structure and take into account the interactive system of the power of the party, the National People’s Congress, etc. in order to make it a progressive research, which can enable the elements of constitutionalism to supplement the current constitutional framework; 4. Scrupulous examination should be given to constitutional practices in other regions and cultures, especially those influenced by the Chinese culture or with a similar institutional set-up, such as Taiwan and France; 5. Observations should be made in regard to the traditional Chinese institutions, such as the institution of the expostulation system (“谏议制度”, or giving advice), supervision system, and the institutions established in this light, e.g., Taiwan’s Control Yuan.
Improving Entrepreneurs' Survival Environment: Abolishing Death Penalties in Relation to Fund-Raising Cases in China
In recent years, environment for private enterprises has been taking a deteriorating turn, which attracts attention from the media and the academia. The causes are complex and multi-faceted, including: 1, the abuse of powers by government officials as the government powers expand; 2, “the private-owned deteriorating with the state-owned advancing” (guojin mintui) worsens the picture where the survival environment for private enterprises gets more and more squeezed; 3, external demands of enterprises decrease while internal cost increases; 4, financial suppression escalates with the industrial restructuring and updating lagging behind; and 5, the fluctuation of macroeconomic policies by the government poses uncertainty for production and investment. Moreover, many innocent entrepreneurs were labeled and persecuted for their “gangster behaviors” by the policy and law enforcements in Chongqing city, which was just a glimpse of similar occasional “gangster crashing” movements in the country. Many entrepreneurs are suppressed and sanctioned in the name of “illegal fund-raising”. According to active law, the court can sentence entrepreneurs to death penalty with this charge.
Unirule Institute of Economics is planning to undertake research on the problems of the crime of “illegal fund-raising” and specific methods to abolish this charge.
It is fit for Unirule to carry out this research project. Unirule Institute of Economics is a non-profit, non-governmental organization, which focuses on institutional economics with expertise in economics, laws, and politics. It has been dedicated to independent research on China’s institutional reforms and public policies as well as the reform of private finance. In 2003, 2011, and 2013, Unirule held seminars on the cases of Mr. SUN Dawu, Ms. WU Ying, and Mr. ZENG Chengjie. These seminars have been very influential before and after the close of the cases.
Unirule Institute of Economics has undertaken research projects in corporate finance and private finance in recent years. Over the years, Professor FENG Xingyuan has been carrying out pioneering research on private finance and private enterprises. He has gained rich experience and published many publications and papers on relevant topics, including “Report on the Freedom of China’s Corporate Capitals”, “Report on the Survival Environment of China’s Private Enterprises 2012”, research on the risks of private finance, etc. In August 2013, Professor FENG Xingyuan and his research team completed and released the “Report on Private Enterprise Fund-Raiding in West Hunan and the Case of Mr. ZENG Chengjie”, which analyzed and assessed the process, nature, problems, and causes of a series of events and proposed policy recommendations concerning the fund-raising activities in West Hunan and the case of Mr. ZENG Chengjie.
Business Ethics Declaration of Chinese Entrepreneurs
Over the last three decades, China’s economy has been embracing rapid growth with entrepreneurs being a key drive. The biggest and most significant structural change is the rise of entrepreneurs who constitute the pillar of the society nowadays. Today, the biggest, and the youngest group of entrepreneurs are going international, bridging China and the world.
However, because of the abnormal political, social and ideological environment of China for the last five decades, Chinese entrepreneurs happen to be widely confused and for the last thirty years, the emerging group of entrepreneurs has been suffering from severe anxiety over identity:
Firstly, due to the long time anti-market ideological propaganda by the authorities, many entrepreneurs believe they have the “original sin”. They are led to believe that their profits are based on exploiting the workers, which further leads to their confusion and anxiety over the ethical justification of their fortune and profits.
Secondly, this anti-market ideology also affects the public; leading the public to envy the fortune of entrepreneurs while disrespect them since their deeds are “unethical” and “dishonest”. This public opinion, in return, affects entrepreneurs’ self-identity. They, therefore, can’t convince themselves of the contributions they make to the society, or identify themselves within the social hierarchy.
Thirdly, Chinese entrepreneurs, especially those whose enterprises have gone international, are bothered with this severe identification anxiety. Chinese people stand out in entrepreneurship, so do Chinese enterprises. But what are the driving forces behind? Thanks to the long time culture break-up from the traditions, and the anti-tradition propaganda, Chinese entrepreneurs find it hard to comprehend and identify their cultural and social roles. This leads to the chaotic and restless mental state of entrepreneurs. This also results in the lack of a cultural supportive pillar for enterprise management in China.
“Business Ethics Declaration of Chinese Entrepreneurs” aims to provide answers to the anxiety over identity for Chinese entrepreneurs, to re-identify them by providing authentic and orthodoxical conceptions, to help them mature their thoughts and corporate social responsibilities.
This research project is committed to establishing a value system for Chinese entrepreneurs. To confront the anxiety over identity for Chinese entrepreneurs, this project provides answers to the three questions below:
1.Do Chinese entrepreneurs have the “original sin”?
2.What do Chinese entrepreneurs contribute to the society?
3.How do Chinese entrepreneurs gain respect?
An Economic Research of Chinese Urban Smog Management
The issue of smog has been on the spotlight in China that no matter government officials, ordinary citizens, or journalists and the press have expressed serious concern and anxiety towards it. Unirule Institute of Economics takes on this research topic and is conducting an economic research on China’s urban smog management.
The urban smog is attributed to multiple factors with many interest parties involved, which also makes it an economic issue. Unirule seeks to find a solution to the management of smog by the design of institutions from an economic point of view.
Fairness and Efficiency of Financial Resource Allocation
The first scale problem of the fairness and efficiency of financial resource allocation is whether the overall tax bearing standard falls within the optimal interval, whether the design of tax kinds and the mechanism will harm the development of the economy. The second scale problem is whether the expenditure structure of the existing financial resource allocation, especially transfer payment, obeys the principal of justice, and the efficiency of financial expenditure especially the general administrative costs.
Unirule Institute of Economics is going to undertake research on the fairness and efficiency of financial resource allocation with the emphasis on the second scale problem. In order to fulfill the ideal of justice in a society, the involvement of financial resource allocation is one of the methods, and a universal one. A state can promote justice by implying financial expenditure in two ways: the direct and the indirect way. When applying the direct way of implying financial expenditure measures to promote justice, financial expenditure is directly distributed to individuals to fill the gap of incomes between individuals.
Among the financial expenditure items of China are pensions and relief funds for social welfare, rural relief funds as well as social insurance funds. The indirect way is by governments' increase in expenditure used for supporting agriculture and villagers, construction of infrastructure, education and medical treatments. This research is on the justice of financial resource allocation and it deals mainly with whether the transfer payment of financial resources obeys the second rule of Rawls's theory of justice, which states that when violation to the first rule has to be made, resource allocation can be towards the poorest group of people. Besides the justice issue, efficiency is also involved in the financial resource allocation. The administrative costs of China have long been above the average standard of other countries in the world, therefore, a big amount of public financial resources are wasted (trillions of RMB per year as estimated). In regard with the efficiency issue of the financial resource allocation, this research deals mainly with the change of ratio of administrative costs by government agencies (in addition to other costs, such as medical treatments of government officials covered by public budgets, and housing subsidies) of financial income. The reform of the fiscal and taxation system is one of the core issues in China's on-going reforms. This research aims not at a comprehensive examination of the fiscal and taxation system, but a specific aspect which is the "fairness and efficiency of financial resource allocation", and evaluating the status quo of China's financial resource allocation.
Research on China's Urbanization on the Local Level
Urbanization is one of the most essential economic and social policies of the new administration. The emphasis of this policy is posed on medium and small cities as well as townships. As noticed, there are thousands of industrialized townships in China with their social governance lagging far behind their economic development.
Firstly, a big population is located in between the urban and rural level, which can't transform into citizens. Hundreds of millions of people have left their villages and moved to commercialized and industrialized towns. They are in industrial and commercial occupations and it is highly unlikely that they would go back to their villages. However, they are not entitled to local Hukou registration, which further leads to the deprivation of various rights, for example, the right of education.
Secondly, public governance in such industrialized and commercialized towns, in general, is at a rudimentary level. The number of officially budgeted posts is asymmetric with the population governed, which leads to the employment of a large number of unofficially budgeted staff and unjustified power to govern. There is a lack of financial resources for the local government to carry out infrastructure construction or to provide public goods sufficiently. Thirdly, the urbanization results in imbalanced development of the structure of society. Since the industrialized and commercialized townships are unable to complete urbanization, urbanization in China has basically become mega-urbanization which is dominated by administrative power. Local governments centralize periphery resources with administrative power and construct cities artificially, which impedes townships and villages from evolving into cities by spontaneous order. Fourthly, industry upgrading can't be undertaken in those industrialized and commercialized townships and the capacity for future economic development is greatly limited. The industry upgrading is, in essence, the upgrading of people. Enterprises ought to draw and maintain technicians, researchers, and investors, to meet their needs for living standards, which cannot be satisfied by townships. Similarly, the lagging urbanization reversely sets back the cultivation and development of the service industry, especially the medium and high-end services.
Unirule Institute of Economics is going to carry out research on urbanization of China on the local level, aiming at improving public governance of the industrialized townships, optimizing the urbanization methodologies, and improving the "citizenization" of migrant workers, therefore further pushing social governance towards self-governance and democracy.
Research on the Public Governance Index of Provincial Capitals
At the beginning of the year 2013, Unirule conducted field survey, including more than 10 thousands of households in 30 local capital cities. According to the field survey, the Public Governance Index was derived. The main conclusions of the PGI report as below:
Three statements summarize the status quo of public governance in provincial capitals. Firstly, public services have generally just gotten a pass. Secondly, protection to civil rights is disturbing. Finally, governance methodologies need improvements. These statements point out the solution: the structure of the society needs to be altered from that with a government monopoly to a civil society with diverse governance subjects. The ranking of provincial capitals in the public governance assessment from the top to the bottom is as follows: Hangzhou, Nanjing, Urumqi, Tianjin, Chengdu, Shanghai, Beijing, Nanchang, Xi'an, Xining, Shijiazhuang, Wuhan, Guangzhou, Yinchuan, Hohhot, Chongqing, Shenyang, Changsha, Jinan, Kunming, Nanning, Haikou, Fuzhou, Guiyang, Harbin, Hefei, Changchun, Zhengzhou, Taiyuan and Lanzhou.
Generally speaking, all provincial capitals are graded comparatively low in the three public governance assessments from 2008 to 2012. Even those that ranked the highest in performance have just barely passed the bar of 60 points. Few provincial capitals with poor public governance got over 50 points.
There is a certain amount of correlation between the changes of ranking and improvements in public governance in provincial capitals. In the short term, should the capital cities be willing to raise their rankings, they can achieve this by increasing transparency in government information and civil servants selection, encouraging local non-governmental organizations, or promoting wider participation in local affairs. There is but a weak correlation between public governance and the local GDP level. However, a strong correlation exists between the rankings and the equity of local fiscal transfer payment. That is to say, a region gets a higher ranking in public governance if subsidies to local social security, medical care, education and housing are distributed more to the poorest residents in that region. On the contrary, a region's ranking falls if such resources are distributed with prejudice to the groups with high incomes. This phenomenon shows that equity is of significance in the assessment of the government by the people.
When residents are not satisfied with medical care, elderly support system, water supply and electricity supply, the situation can be improved when they complain to the government. But when similar situations take place in public transportation, environment greening, heating systems, and garbage management, whether by collective actions or filing complaints to government agencies, residents can hardly be satisfied with what the government does.
According to the three public governance assessments carried out from 2008 to2012, we discovered that the Gini coefficient of residents in provincial capitals was decreasing and the income fluidity was improving. From 2010 to 2012, citizens' comments on protection of civil rights are deteriorating, especially in terms of property and personal security. The request for freedom of speech is also increasing. For the moment, citizens in provincial capitals have a low evaluation on the cleanness and honesty of local governments.
Research on Disclosure of Government Information
Room for reforms is getting narrower as the opening-up and reforms deepen. It also leads to a more stabilized vertical mobilization of the demographic structure with the conflicts in the distribution of interests exacerbating. A collaborative system centering the political and law system and involving close cooperation between the police, courts, petition offices, and the city guards (Chengguan) is developed to deal with social unrest. This system is operated by local governments and finalized as a system of maintaining stability (Weiwen). There have been Internet spats over the amount of Weiwen funds. It is unsustainable to maintain such a Weiwen system, and the disclosure of government information is the most significant approach for this end. The essence of public governance is to dissolute conflicts instead of hiding and neglecting them. And one way to achieve this is by sufficient communication. Public and transparent appraisement and supervision cannot be achieved without transparent government information, otherwise the result will be the exclusion of citizens from public governance.
Unirule Institute of Economics has been undertaking research on the disclosure of government information since 2011. This research is carried out not only from the perspective of the regulations for the disclosure of government information which evaluates whether governments of various levels are obeying the regulations and their performances, but also by examining information disclosure laws in developed countries while looking at the status quo in China. There are seven aspects where government information disclosure can be improved, namely, information disclosure of government officials, transparency of finance, transparency in the decision-making mechanism, transparency in administration, transparency in public services, transparency of enterprises owned by local governments, and transparency in civil rights protection.
Upcoming Events
Unirule Biweekly Symposiums
Unirule's Biweekly Symposiums are known in China and throughout the world for their long history of open and in-depth discussions and exchanges of ideas in economics and other social sciences. Over 380 sessions have been held and over 15,000 scholars, policy makers, and students, as well as countless readers on the web, have directly and indirectly, and participated in the Biweekly Symposium for close to 20 years.
Biweekly Symposiums begin at 2 p.m. every other Friday and are free and open to the public.
Schedule
Biweekly Symposium No. 551: 10th Jun., 2016
Biweekly Symposium No. 552: 1st Jul., 2016
Previous Biweekly Symposiums
Biweekly Symposium No. 549: China's Vaccine Security and Its Management System.
Lecturer: WANG Keqin
Host: SHENG Hong
Commentators: CHEN Taoan, JIANG Su
Concerning the latest vaccine scandal, Mr. WANG Keqin, a famous investigative journalist who revealed the former vaccine scandal in Shanxi Province, thought it was merely resurgence of the previous incident. To his regret, his previous warning on more scrutinisation was ignored by the authorities.
Mr. WANG Keqin introduced the investigation on the previous Shanxi vaccine scandal. It was very difficult for the public to get to know the truth when anything took place in the public sphere concerning public security. And most of the obstacles were posed by the government. He then emphasised that the the main problem with vaccines was in the circulation process, though misconduct was also discovered in the manufacture of the vaccines.
Professor SHENG Hong commented that the improper management of this scandal inflicted a lot of controversies. And the major problem was a mentality and practice that department interest comes before public interest. The government was incapable of handling such public crises when departments came forward and block the journalists from revealing the truth. That’s why it was critical to fight against department interest and uphold citizens’ right to know.
Biweekly Symposium No. 550: Why Civilisation Is a Byproduct.
Lecturer: ZHENG Yefu
Host: QIN Sidao
Commentators: WANG Yan, TIAN Fangmeng, CHU Huijuan
Professor ZHENG Yefu introduced the origin of his book Why Civilisation Is a Byproduct.
He introduced that many did not accept his ideas and argued that the Great Wall and the landing on the moon was great achievements of civilisations. How are they byproducts? He introduced six cases in his book to prove that civilisations are not the result of planning or intentions, such as marriage out of the family, the origin of words, agriculture, the invention of paper, woodblock printing, and movable type printing.
As Professor ZHANG Yefu stressed, civilisation is a result of a series of unintended interaction instead of planned design.
Mr. WANG Yan commented that the emergence of modern civilisation featured the arrogance of rationality. The contempt of knowledge and the false confidence in planning has led to disasters of mass scale. Civilisation is a very complicated thing that can be understand by rationality, but there’s also things unknown and unfathomable to human reasoning.
Dr. TIAN Fangmeng from Beijing Normal University thought Mr. ZHENG’s argument was built on shaky ground. He thought the six cases were illustrated well, but were insufficient to support the conclusion.
Editor: MA Junjie
Revisor: Hannah Luftensteiner
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