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7.
In an attempt to improve the efficiency of its workforce, China has recently introduced a reform in its
labour system. The reform covers four aspects : the labour contract system, recruitment procedures, dismissal of workers, and labour insurance for the unemployed. Starting from October this year, all new employees in the
state sector are to be employed under a regular contract system, with the contract lasting between one to five
years. Workers are to be recruited through open competition, instead of as under the old system through job assignment by the state, and they may be dismissed from an enterprise for indiscipline. However, as regards the laying-off of workers during periods of slack business, it appears that unless an enterprise is on the verge of bankruptcy, it is not free to do so. In cases where workers are unemployed, they are entitled to unemployment benefits paid from insurance funds. These changes will give greater freedom of choice for both the
enterprises and the workers. For the enterprises, improved labour discipline should be another advantage of
the reform.
8.
Unlike the labour reform, the proposed
introduction of the bankruptcy law was met with some set-backs. In September, the Standing Committee of the National People's Congress (NPC) resolved that the draft legislation should be returned to the Legal Committee for "further investigation, study and revision jointly with other departments concerned". Since it is uncommon for
the NPC not to give approval to a much publicized bill, this event has been interpreted by some observers as a
set-back for the reformers. Yet, on pragmatic
considerations, the hesitation over the passing of the bankruptcy law is understandable because of the likelihood that it will cause unemployment. Losses incurred by state-run industries have increased by 58.8% in the first seven months of this year. However, until China's price
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