By Lin Zeyan, Liu Lihui, Li Chunmiao & Tian Xiu, Development Research Center of the State Council

Research Report No.060, 2007

In the mid- and late 1990s, a batch of extremely large central enterprises (groups) began restructuring in order to get listed abroad. The restructuring was mainly done by stripping off the non-listed part, which meant the performing assets with high growth potentials were listed on the stock markets and the nonperforming assets and redundant personnel were stripped off and transferred to the non-listed enterprises. This is how a large number of state-owned non-listed enterprises and related personnel have been formed.

The early-retired personnel constitute a great proportion of the personnel from non-listed enterprises. Early retirement here means "to leave work post and rest at home". Article 9 of the Regulations on the Placement of the Redundant Personnel of the State-Owned Enterprises promulgated by the State Council in 1993 provides: "With personal application and corporate employer's approval, the workers who have less than five years left before their retirement ages may leave their work posts and rest at home. During the period when the workers leave their work posts and rest at home, the enterprises pay living allowances to them." Therefore, early retirement was a form of labor management used by the enterprises to strip the redundant workers off their work posts for rest. It was a product of reforming the economic system and transforming corporate operational mechanisms. Early retirement played a positive historical role in properly handling redundant corporate personnel, alleviating corporate burden and boosting corporate vitality. However, the practice to strip off the nonperforming assets and redundant personnel and get the performing assets listed on the stock markets failed to fundamentally solve the personnel issue confronting the state-owned enterprises. In fact, it was a stopgap measure to "shelf the personnel issue". Currently, the issue of early-retired personnel in some extremely large central enterprises has reached a critical point and become a thorny problem. On the one hand, most of the non-listed enterprises are unable to operate normally and are in no position to effectively solve the issue of early-retired personnel. On the other, if the publicly listed companies are requested to raise funds through the stock markets and use their business revenue to back-feed the non-listed companies, lots of legal issues will be involved. We should say that how to bring the non-listed enterprises out of their difficult position and how to prevent the issue of early-retired personnel from becoming aggravated is a major issue that must be properly handled in the course of restructuring the state-owned enterprises. Besides, how to deal with the existing labor relations and income gap is also a major legal issue.

I. Problems Confronting Early-Retired Personnel and the Root-Causes

On the whole, the practical problems confronting the early-retired personnel of the state-owned enterprises can be classified as "one plenty, two lows and three highs". "One plenty" means there are plenty of early-retired personnel. For instance, China Mobile alone has about 20,000 early-retired personnel. "Two lows" means the early-retired personnel are noted for low-level knowledge and skills and low-level income. "Three highs" means a large number of the young and middle-aged early-retired personnel have to face a high employment threshold, bear a high family-support burden and cope with a widening income gap. Of all categories of personnel in the state-owned enterprises, the early-retired personnel are the most complicated, least stable and most problematic group.

1. The history of corporate restructuring indicates that in solving the issue of "early retired" personnel of the state-owned enterprises, most places and units have strictly complied with the three conditions specified in the Regulations on the Placement of the Redundant Workers of the State-Owned Enterprises promulgated by the State Council and other related laws, i.e. the workers must be less than five years before their retirement ages; they must present their written applications; they must be approved by corporate leadership. But some places and institutions persuaded some workers who were under the age for early retirement to apply for early retirement, under the pretexts of taking in fresh blood, boosting vitality, increasing efficiency and reducing cost. When persuasions failed, these places and units arbitrarily arranged "early retirement" for the workers. These places and units did so to fulfill the "efficiency boosting by staff cutting" targets assigned by higher authorities. Some places and units even exaggerated the restructuring risks when they persuaded the workers to retire in advance, lured or arbitrarily forced the enterprises to accept the early retirement targets, and even eased the state's age restrictions on the early-retired personnel. These irregularities created too many hidden troubles for the subsequent management of the early-retired personnel.

2. In some central corporate groups, the income gap between the early-retired personnel and the workers in active service of the listed companies has been widening as a result of the rapid business development of these companies. The early-retired personnel have diverse practical difficulties: their incomes are low, their spouses are laid off and their children are unable to find employment. More and more of them are demanding the enterprises to increase their pay and benefits.

3. A considerable proportion of the early-retired personnel have been living idle at home, having a complex mentality and becoming listless. As they have weaker ability and limited channels to find jobs, they regret they had chosen early retirement. Many of these people are strongly demanding to return to their work posts.

4. The above-mentioned factors have triggered a growing number of labor disputes for arbitration and litigation and frequent labor complaints to higher authorities. In particular, the workers of the state-owned enterprises are clearly more hostile and often resort to some irrational ways such as complaining to higher authorities to voice their grievances, due to their ideological concept, policy understanding, social and environmental influences and personal practical problems. Investigations reveal that in most provinces (municipalities), the early-retired personnel have lodged frequent group complaints to the listed companies or the regional governments in their provinces or even to the corporate headquarters or the relevant government ministries and commissions. If this problem is not solved in a timely and effective way, it will have an unfavorable impact on the reputation and business operations of the listed companies. Worse still, it could cause social instability and result in social contradictions.

5. The resources for the management of the early-retired personnel are insufficient. Currently, the state-owned corporate groups deal with their early-retired personnel by establishing non-listed enterprises. In general, the non-listed enterprises have to assume too much corporate liabilities but receive no substantial asset inputs in the course of corporate restructuring. In face of an enormous number of early-retired personnel and the complex composition of such personnel, the non-listed enterprises face two major resource constraints: insufficient administrative and organizational resources; huge capital gap and grossly mismatching between resources, rights and obligations.

II. Guiding Principles for Solving the Issue of Early-Retired Personnel and Their Management

1. In implementing the relevant documents issued by the central government and in light of the scientific approach toward development and building a harmonious society, the right of the early-retired personnel to share the fruit of reform and development must be respected

The scientific approach toward development must be upheld in managing the overall economic and social development. In keeping with the general requirements of democracy, rule of law, fairness, justice, honesty, love, vitality, social stability and harmonious coexistence between man and nature, priority efforts should be made to solve the issues that are most relevant, most direct and most realistic to the interests of the ordinary people. Building a socialist harmonious society is a consecutive process of continuously solving social contradictions. It requires us to scientifically analyze the contradictions, problems and their causes that have impacts on social harmony, to more actively face and solve the contradictions, to minimize the factors destabilizing harmony, and to constantly promote social harmony. As the early-retired personnel is a historical issue that appeared in the course of reform and development of the state-owned enterprises, the enterprises must work hard to solve their problems in keeping with the scientific approach to development and the basic requirements of building a harmonious society and with a strong sense of responsibility.

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