When I was in high school, I went to a bakery in Budapest, Hungary, during the Communist era. The bakery was tiny — the kind that in the United States would have at most two people working there. I was the only customer. I ordered from one woman, was instructed to go to the cash register by another woman, had my pastry wrapped by another woman, had my pastry handed to me by a fourth woman, and paid a fifth woman. Now that’s what I call full employment.
China is not near to that yet, but foreign businesses would be wise not to underestimate how important it is to Chinese government functionaries that “their constituents have jobs. I thought about this last week when two of my law firm’s clients told me of their discussions with Chinese government people where the Chinese government people had stopped by to pretty much just make sure these two companies had no layoff plans. Both clients told me no threats of any kind were made, but both felt their relationship with the government would be much better if nobody got laid off.
Today, the always excellent Managing the Dragon blog did a post aptly entitled, “Jobs: Now “Job One” in China,” [link no longer exists] in which it talks about the heightened importance of jobs in China right now. The post goes on to set out the following “suggestions for foreign investors in China:”
- If you are in a joint venture, now is not the time to be pressing for those labor-saving measures to increase its efficiency. In the best of times, Chinese partners and the local governments they answer to are sensitive to any job cuts that may threaten stability. In the current economic climate, expect the resistance to be even greater.
- If you have a wholly-owned company in China, be careful in how you implement any layoffs. In the face of uncertain economic prospects, Western companies will instinctively seek to adjust employment levels, which is understandable. Even though your operation in China may be wholly-owned, however, this will not stop laid-off workers from taking their complaints to the local government–and the government will be listening. Talk to your friends in the local government ahead of time so there are no surprises.
- Make the most of any expansion plans your business may have in China by publicly or privately announcing them. China has a long memory and remembers companies and individuals who come forth in difficult times.