(Guo Jing Mao Qi  No. 549, Issued by General Office of the State Economic and Trade Commission on behalf of the State Economic and Trade Commission, Ministry of Labor, Ministry of Finance, and the People's Bank of China on August 21, 1997)
People's governments of each province, autonomous region, municipality directly under the Central Government, and municipalities under separate planning of the Central Government, Xinjiang Production and Construction Corps, Departments of the State Council, and the General Logistics Department of PLA:
In order conscientiously to implement the spirit of the "Supplementary Notice of the State Council on the Acquisition of Enterprises, Declaration of Bankruptcy and Re-employment of Staff and Workers of State-owned Enterprises for Trial Implementation in Several Cities" (Guo Fa  No. 10) and the "Notice of the General Office of the State Council on the Transmission to the Ministry of Labor of the Report on the Implementation of the Re-Employment Project" (Guo Ban Fa  No. 24), a joint investigation group headed by Chen Qingtai, Vice-Minister of the State Economic and Trade Commission, was formed by the State Economic and Trade Commission, Ministry of Labor, Ministry of Finance and People's Bank of China in April 1997 to go to Shanghai for relevant research and investigation. The "Investigative Report on Shanghai's Experiences in Carrying Out Re-Employment Projects and Establishing Re-Employment Service Centers for Staff and Workers" is hereby distributed. Please study and publicize such experiences with regard to actual local conditions.
At present, as the nation is deepening its reform on state-owned enterprises and implementing the two fundamental transformations, the proper dispersion and placement of laid-off workers and the assurance of their basic standard of living have become important tasks crucial to reform, development and social stability. In their optimization of capital structure and establishment of a modern enterprise system, leaders of the CPC Shanghai Municipal Committee and the Shanghai Municipal Government, viewing the Re-Employment Project as a project for the "common good", personally investigated and actively implemented Re-employment Projects with regard to actual conditions, neither willing to allow laid-off workers and staff to stay on with enterprises for too long nor to simply throw them upon the mercy of society. With these goals in mind, they created Re-Employment Service Centers for staff and workers to help those laid-off to be re-employed. Shanghai's experiences have proven that, so long as the leaders are sufficiently attentive and creative and actively conduct investigations, the difficult issue of dispersing and placing laid-off staff and workers may be gradually solved in a more efficient manner.
When you study and publicize the Shanghai experiences, you will primarily study the guiding principles and essential experiences of Shanghai in its implementation of Re-employment Projects. You should take into account actual local conditions and be creative in finding suitable solutions. Focus should be placed upon those staff and workers who have been laid off from bankrupt or acquired enterprises, or who have lost their jobs as a result of the increase of efficiency through reduction in staff and workers: these should receive proper placement and guaranteed a basic standard of living. Efforts should be made to actively open up new areas of employment, investigate new methods of re-employment, accelerate the construction of labor markets, perfect the social insurance system, and gradually establish a new mechanism for re-employment through the labor market. You should carry out political and ideological work, help the laid-off to be free from worries and concerns, update employment ideas, and establish a competitive consciousness. Professional training for the laid-off will be enhanced to improve their professional skills so that they can meet market demand. You should mobilize all social sectors and the general public to show concern for the laid-off, and to support and participate in Re-Employment Projects. Finally, you should conduct media publicity properly in order to create a good social environment for the implementation of Re-Employment Projects.
"Investigative Report on Shanghai's Experiences in Carrying Out Re-Employment Projects and Establishing Re-Employment Service Centers for Staff and Workers"
Shanghai began to implement their Re-Employment Project in 1994. In recent years, with the adjustment of the Shanghai's industrial structure, the deepening of State-owned enterprise reform and municipal construction development, the laying off of staff and workers in some enterprises has become an increasingly prominent issue. The CPC Shanghai Committee and Shanghai Municipal Government have scrutinized this issue, and proposed to regard the implementation of a Re-Employment Project as a major task in the reform, development and stability of the municipality. In 1996, under the leadership of municipal leaders, after a great deal of thorough and detailed investigation and research, Shanghai published new measures to implement the Re-Employment Project, and established a Re-Employment Service Center (hereinafter referred to as the "Center") for staff and workers to be entrusted with the laid-off staff and workers by State-owned enterprises, with the goal of continuing and perfecting existing re-employment policies. In June 1996, Shanghai first began trial operations in two state-owned holding companies, the Shanghai Textile Corporation and the Instruments and Electronics Corporation. After half a year of operation, the Center ran smoothly and achieved good results.
I. Fundamental Methods of the Establishment of the Center and Entrustment
1. Nature and Function of the Center: The Center is an internal re-employment service introduction agency affiliated with shareholding (group) corporations. During the current reform of urban economic structures, it is inappropriate to keep the laid-off within the enterprise for long, nor is it appropriate to simply leave them to the care of society. Therefore, to establish the Center, which is to be entrusted with the laid-off staff and workers by the bankrupt enterprises, is an interim measure taken during the transition to a market economy structure. Shanghai states that the core of the establishment of the Center is to "set up one mode and two mechanisms", namely the Re-Employment Service Center mode under which holding (group) corporations and struggling enterprises will be jointly responsible for the entrustment of the laid-off, with financial support from the government and society to build a bridge to help disperse and place laid-off staff and workers from state-owned enterprises during the transitional period in order to facilitate the formation of the two mechanisms, i.e., the mechanism of selecting the superior and eliminating the inferior and that of placing the laid-off. The function of the Center is to be entrusted by the enterprise, and with the support of the industries ( state-owned holdings company) to conduct management of the laid-off staff and workers separated from the enterprise, ensure a minimum standard of living for laid-off staff and workers, and help the laid-off staff and workers find re-employment.
2. Organizational form and entrustment procedure of the Center: the Center consists of a three level organizational system. The state-owned holdings company shall establish the Center, the subsidiaries of the state-owned holdings company shall establish the branches of the Center, and the production enterprises shall establish the work station. The staff of the Center shall be selected from the enterprises and the enterprises shall be responsible for their welfare. The funds of the Center shall be all used to protect the livelihood of laid-off staff and workers and help them to get re-employed. The surplus staff of the enterprise shall be laid off first and then be registered with the Center (when a bankrupt enterprise enters into the legal procedure of declaring bankruptcy, all the staff and workers of such enterprise shall be registered with the Center). When the laid-off staff and workers are registered with the Center, the enterprise, the staff and workers and the Center shall jointly sign an entrustment management agreement in which the responsibilities and rights of each party shall be defined. The original enterprise maintains its relationship with the laid-off staff and workers only in name and shall no longer be responsible for their salary, welfare and employment placement. The relationship between the laid-off staff and workers and the original enterprises shall be terminated upon their re-employment or retirement.
3. Source and purpose of the Center's funds: The Center's funds shall be jointly raised by the government, society and the enterprises. The Shanghai Municipality Government shall be responsible for the poverty-relief fund budget from the financial department of Shanghai Municipality; society shall be responsible for the management fees levied on the units which use labor forces from other areas and the other funds raised by society; enterprise fund-raising shall be jointly conducted by enterprises which disperse and lay off staff and workers and state-owned holdings companies. Furthermore, placement fees for staff and workers after the enterprise goes bankrupt shall be allocated to the Center. The Center's funds shall be contributed annually by the three parties in accordance with the stipulations. The Center shall have its own independent account for unified use. The Center's funds shall be mainly used in the following four areas: 1) assurance of a minimum standard of living for laid-off staff and workers; 2) coverage of laid-off staff and workers' daily medical fees; 3) payment of the social old-age insurance and medical insurance for laid-off staff and workers; 4) training of laid-off staff and workers for the purpose of their re-employment and payment of relevant placement fees. The Center ensures a minimum standard of living for laid-off staff and workers by guaranteeing the funds for their food, medical care, and old-age care.
4. Formation of the re-employment mechanism and the dispersion channels for -off staff and workers: whether the laid-off staff and workers can be successfully dispersed is the key element in ensuring the normal operation of the Center. In order to prevent the laid-off staff and workers from forever staying on at the Center, the Shanghai Municipality stipulates that the term of the laid-off staff and workers staying at the Center shall not exceed two years at most and furthermore that the monthly expenses laid-off workers shall receive in the second year shall be only 82% of the monthly payments that they received in the first year. In this way, the mechanism for the encouragement of re-employment shall be formed. Under the guidance of the municipal Party committee and the municipal government, and with the support of all society, the Center shall conduct dispersion through the following four channels: 1) dispersion of the laid-off staff and workers to districts and counties within the same industry or in different industries. With the small-size urban enterprises belonging to the cities placed under the control of the districts and counties and with the assets flow of the enterprises, the laid-off staff and workers of the cities shall be made to flow to the economy of the districts and counties. The development of the urban household and community service industries shall be encouraged in order to help the re-employment of laid-off staff and workers; 2) the combination of industry and commerce and the transfer from the original two industries to the tertiary industry. In order to encourage newly established enterprises and enterprises in the commercial and service industries to employ laid-off staff and workers, the Center shall, with regard to specific situations, give placement fees to those enterprises which employ laid-off staff and workers and grant them certain tax preferences; 3) laid-off staff and workers and labor export are encouraged to provide for themselves. The Center shall encourage laid-off staff and workers to join society's labor force. Laid-off staff and workers who engage in labor export and who earn low incomes shall be adequately compensated and their social insurance fees shall be paid; 4) laid-off staff and workers shall be encouraged to find jobs on their own. The Center shall pay a lump-sum economic compensation fee to those who find jobs by themselves. Shanghai Municipality shall also develop informal employment; that is, shall organize laid-off staff and workers and have them participate in services which are convenient and beneficial to the residents of the community, or engage in public welfare and temporary activities. In these situations, there will be no requirement for the establishment of a steady labor relationship. This flexible employment form shall provide an important method for the dispersion and placement of laid-off staff and workers and also establishes supportive policies.
II. Major Achievements through the Establishment of the Center
At present, the two Centers in Shanghai are working fine and the work at the experimental site is progressing smoothly, as is reflected in the following areas:
1. The minimum standard of living for the laid-off staff and workers is ensured and the laid-off staff and workers are dispersed through many channels. The minimum standard of living which includes the food, medical care and old-age care of those registered with the Center is effectively ensured. Laid-off staff and workers are in a stable mood. According to the requirements of the municipality's plan, more than 40% of the laid-off staff and workers at the Center shall be dispersed in the current year, and more than 40% shall be dispersed in the second year. A total of 80% of the laid-off staff and workers shall be dispersed in two years. By the end of 1996, a total of 115,000 laid-off staff and workers had been registered with the Center. Of those 115,000 people, 58,000 people were dispersed and placed through various channels and 53,000 people remain at the Center waiting to be placed. Regarding dispersion channels: 1) the entrustment agreements and labor relationships of 32,000 people have been terminated, and of these 32,000 people, 10,000 people found jobs by themselves and 22,000 people retired early; 2) 14,000 have terminated their entrustment agreements but retained their social insurance relationships; and 3) 12,000 people have been dispersed through labor export and other informal methods. The Center has a steady and reliable source of funds and shall continue to be able to issue expenses for the minimum standard of living and to pay for social insurance.
2. Regarding the acceleration of structural readjustment and deepening of the reform: at present, whether laid-off staff and workers can be properly dispersed and re-employed is a key problem in the reform and readjustment of state-owned enterprises. Shanghai Municipality has, through the establishment of the Center, solved this problem and laid a good foundation for carrying out the reduction of staff while increasing efficiency, the acquisition of enterprises and the declaration of bankruptcy. In 1995, none of the enterprises affiliated with the Textile Company and Instrument and Electronics Company (two state-owned holdings companies) declared bankruptcy or was closed because of difficulties in the placement of staff and workers. However, in less than half a year after the Center was established, 17 enterprises of the two state-owned holdings companies declared bankruptcy and were closed, affecting almost 10,000 staff and workers at their posts and 13,000 retired people. In 1996, the textile holding corporation had, by means of such measures as acquisition, declaration of bankruptcy, reduction of staff while increasing efficiency, and the conversion of the system, eliminated the 350 million yuan loss suffered during the months from January to July and realized a profit of 10 million yuan by the end of the year. 2800 people (30% of the total) of the Instrument and Electronics Corporation under the Instrument and Electronics Holdings Corporation have been dispersed and employed with the help of the Center. The company eliminated the loss incurred at the beginning of the year and brought a favorable turn for the enterprise.
3. Regarding the formation of new employment mechanism and creation of new employment fields: Shanghai Municipality has always regarded the establishment of the market employment mechanism as its guiding principle. More than 400 job introduction agencies have been established in Shanghai. A computer network on labor demand and supply information been established at job introduction agencies under the labor department. In 1996, more than 100,000 laid-off staff and workers and the unemployed in society were re-employed with the help of the labor market. Upon its establishment, the Center voluntarily contacted job introduction agencies, organized laid-off staff and workers to go directly into the market to find jobs, and dispersed laid-off staff and workers by utilizing the large social market. The job introduction agencies have organized exclusive recruitment exhibitions for laid-off staff and workers registered at the Center and provided 7,400 employment posts. The two Centers have also organized the attendance of more than 10,000 laid-off staff and workers at the nearest recruitment exhibitions, through which more than 3,000 people were re-employed. Changes in the employment system accelerated changes in laid-off staff and workers' concept of employment. Many laid-off staff and workers began to pay attention to improving their professional skills and to value every employment opportunity. Now people will do such things as maintenance and repair of household appliances, domestic science, caring for the old and the sick, and management of motorized vehicles which people did not want to do in the past. Some laid-off staff and workers have even joined the ranks of informal employment.
III. Basic Experiences
Shanghai Municipality has standardized good methods and accumulated good experience in their establishment and guidance of the Center in the re-employment work. The good methods and experiences are summarized as follows:
1. Taking in laid-off staff and workers with regard to its dispersion ability; steadily taking in and quickly dispersing laid-off staff and workers. Upon the establishment of the Center, Shanghai Municipality has paid special attention to the taking-in and dispersion of the laid-off staff and workers, combined the urgent need to disperse the surplus workers from enterprises with the actual absorption abilities of society, conducted serious calculations, taken in the laid-off staff and workers with regard to it dispersion abilities, and had the laid-off staff and workers registered with the Center by stages, in groups and in an organized manner. A standing Vice Mayor and a Vice Mayor in charge of industry from the Shanghai Municipal Government are, respectively, in charge of the taking-in and dispersion of the laid-off staff and workers so as to get them registered with the Center in good order and to quickly flow into society. The Center shall focus on dispersion so as to change concepts of employment, strengthen professional training, create new fields of employment, formulate preferential policies, improve the steady taking-in and quick dispersion of laid-off staff and workers and help them get re-employed as soon as possible. The Municipal Government also stipulated that where the term of stay of the laid-off at the Center is shorter than the scheduled term, the fund allocated to the Center shall not be deducted in order to encourage the Center to reduce the staying time of the laid-off at the Center, increase the number of the laid-off dispersed and enhance the taking-in and dispersion ability of the Center.
2. Unemotional adjustment but humane operation. Under the conditions of a market economy, it is inevitable for enterprises to be acquired, declare bankruptcy, reduce staff in order to increase efficiency and lay off and disperse staff and workers. All of these are important methods for the proper disposition of resources. Shanghai Municipality stated that the structural adjustment and assets flow should be rational, but that emotion should be put into the work of dispersing the laid-off staff and workers and insuring their livelihood. The laid-off staff and workers have made considerable contributions to the economic construction of Shanghai and now they are laid off for the development of Shanghai, and in being laid-off are making new contributions to all the residents of Shanghai. All the residents of Shanghai should show great concern for them and assist them in getting re-employed, and carry out the re-employment project as a project for the "common good". The Center also conducts job training for the staff working at the Center, requiring them to be enthusiastic and initiative in serving the laid off staff and workers.
3. Categorizing guidance on the basis of different situations. The situations of the laid-off staff and workers vary greatly and their requirements for employment are different. In light of these situations, the Center takes different measures in accordance with the degree of difficulty in getting people re-employed and the length of standing of the laid-off staff and workers. For example, the Center makes arrangements for the old, the weak, and the sick to begin early retirement or first gives them the expenses to maintain a minimum standard of living and after this temporary transition period has them go through retirement procedures. The Center maintains social insurance relationships with those who have great difficulty in getting re-employed and organize them to join the labor export, and encourages those with professional skills to find a job by themselves. Those contracted staff and workers recruited after 1984 shall go into the labor market to get re-employed after having received job change training. This is referred to as "Old measures for the old; middle measures for the middle-aged; new measures for the newly recruited". This categorized guidance not only reflects the requirement of reform to gradually establish a new system but also reflects compensation for the contribution that senior laid-off staff and workers made to the country, and at the same time greatly relieves the tension of the dispersion and placement work of the Center. This categorization has won the approval of the laid-off staff and workers.
4. Carrying out the ideological and political work and creating a good social environment. The residents in Shanghai think that the carrying out of the Re-employment Project shall be a social system project which requires not only the efforts of enterprise but also the mutual concern , understanding, support and participation of all of society. Therefore, publicity work must be strengthened to make all the residents of the city know that laid-off staff and workers are treasures instead of a burden and to call on everyone to support the Re-employment Project. Shanghai Municipality has given much publicity to this project. Social organizations such as the leading Party group, the Trade Union, the Youth League, and the Women's Federation all take an active part in the Re-employment Project. A favorable social environment for helping the laid-off staff and workers and for supporting the Re-employment Project has been achieved throughout the entire city. The Center has strengthened its ideological and political work and relieved the pressure on the minds of laid-off staff and workers, helped laid-off staff and workers change their employment concepts and built their confidence for getting re-employed, and ensured the success of the dispersion and placement work.
In 1997, Shanghai Municipality plans to continue to perfect its policies and measures while further expanding the experimental site. It has not been long since Shanghai Municipality carried out the Re-employment Project and established the Re-employment Service Center, but it has achieved satisfactory results. Their bold exploration of reform, their initiative creativity as well as their guiding principles and basic experiences in carrying out the Re-employment Project are all worth learning by other localities.