China’s SOE Are Between A Recession and a Union

Monday, December 29, 2008 7:15

In a free market economy (let’s assume that really exists), having the flexibility to make decisions based on the needs of the firm are important. Particularly in an economic downturn.

Unless you are a state owned enterprise and you are told otherwise.

Shanghai Daily articles Chinese SOEs see double-digit decline in profits in 1st 11 months and More than 200 enterprises promise no job or salary cuts in Shanghai offer readers some insight into what is really important in China’s state sector

Jobs. Period.

So, for those looking for managers who will cut employees to maintain the bottom line, or perhaps furlough employees whose lines have been shut down, think again.

The Union has 200 firms who are (in the middle of a recession) willing to publicly commit to keeping their people on board – and raise their salaries – and while the US government may not have the ability to guarantee the same from their largest firms, I would expect that the stocks of their Chinese counterparts continue to fall all the same.

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One Response to “China’s SOE Are Between A Recession and a Union”

  1. Alex says:

    December 30th, 2008 at 1:07 am

    Salient observation. I recall a story by a former journalist who covered the Northeast during the Asian Financial Crisis of the late 90s. While China seemed to be less affected by the crisis than, say, Malaysia, much was obscured from the public eye. This journalist picked up in particular the establishment of local laws regarding working conditions, analytical reporting on these laws was prohibited.

    While a factory may have not cut back it’s staff, and remained technically open, numerous health and safety laws such as ‘Working in temperatures above 25 or below 16 degrees in the bearing manufacturing industry is not permitted.’ [Paraphrasing mine.]

    But then the employment landscape was far more dominated by SOEs with local and national government backing. Now with the economy more in private hands it will be an interesting test of government intervention vs. the private flexibility. It’s an issue of how much intervention.