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Understanding working with Chinese state-owned enterprises

By Ping Wang

Employee turnover rate in Chinese state-owned companies is much lower than in privately-owned organizations. When dealing with state-owned companies you should position yourself as a helper. Your chances for success increase if you align your objectives with government of China’s local, regional or national pathway.

Gaining an understanding of the differences between, and working for and with, Chinese state-owned and private enterprises is important for Chinese as well as many foreigners. Over time, some of the differences between these two enterprise types have disappeared because there are many business best practices in China today that all successful Chinese companies use regardless whether they are state-owned or privately-owned.

However, remaining today are still some very distinct differences between the two types of companies. My article targets to illustrate these differences.

Hiring and the workforce
Chinese state-owned companies typically always hire fresh student graduates and seldom hire experienced professionals from other companies. There might be some exceptions with senior management-level recruitment.

Whereas most privately-owned Chinese companies that are driven by process or workforce talents are used prefer to recruit experience professionals who can come on board easily and deliver business result quickly.

Understanding an organization and its company culture while also being able to navigate interpersonal relationships plays an important role in succeeding in state-owned companies. Conversely, private companies tend to focus more understanding on processes. (See: Managing China manufacturing supply chains)

Therefore, it is easy to understand why fresh graduates in China always must decide which type of company they want to work for before they graduate because shifting from foreign-owned or privately-owned companies to Chinese state-owned companies is almost impossible.

State-owned company employees learn company policy and ways of doing things immediately after graduation and therefore learn to perform consistently. Relationship bonds between employees are usually strong which is necessary for work to be done, but roles and responsibilities are not always clearly defined in state-owned companies. In order to get one’s work done smoothly, cooperation with others is key. Maintaining good relationships with managers, colleagues and subordinates definitely helps make life easier.

The employee turnover rate in state-owned companies is much lower than in privately-owned companies. Based on report findings from a 2010 survey covering 19 industries by one of China’s largest human resources service providers,, the average employee turnover rate for privately-owned companies in China for 2010 was 18.5%.

By comparison, average turnover rate for state-owned companies for the same year was roughly 10%.


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Once you setup relationships with state-owned enterprises these relationships can last quite long. Compensation and benefits policy for state-owned companies are also both more focused on on-the-job benefits and overall personal and family gains.

Traditionally, Chinese state-owned companies have employee dormitories, kindergarten, bath halls… facilities built on the company campus.

Employees work and live on the campus with their families also taken care of by the company.

In the past, state-owned companies have also taken care of employees’ marriage opportunities.

Nowadays, most of these arrangements are no longer available. However, the concept still pervasive in state-owned companies is that the employee not only works for the company but he is also part of a bigger family.

Hence, state-owned companies focus a lot of attention on subsidizing compensation for their employees as well as for their families with either money or goods, or both. Most subsidies are arranged by the Chinese labor union. (See also: China’s Anti-Monopoly Law takes hold of western companies)

Management processes and execution
Management is always top down. Management makes the decisions and asks employees to comply and execute. Any innovation and breakthrough ideas typically originate from the management level. Managers are highly respected by subordinates and are rarely challenged.

This does not mean employees in state-own companies are not good thinkers.

Everyone has their own opinions of the organization and its ability to execute.

Per my observations, state-owned employees talking among themselves during periods of spare time are more likely to discuss their company than their counterparts in privately-owned Chinese enterprises.

Employees in state-owned enterprises contribute ideas and opinions to management teams, but it is always done in private, one-on-one talks instead of in employee group meetings where everyone brainstorms. Expressing feelings and opinions are always conducted through private discussion. Chinese consider this method shows more respect to management.

In state-owned companies, it is always a group of people at the top who make big decisions instead of one individual.

Processes are not always available and important since processes are highly dependent on people and relationships.

All relevant parties are either officially or non-officially invited into the discussion before a decision is finalized.

It can take time for someone to understand an entire organization and who the key people are and how they interact decisions are made. For state-owned employees, to find the right person to talk with, one must adopt a bottom-up approach and consult as many people as possible when trying to determine who actually casts a vote higher up.

The job market in China is booming. Especially for senior management positions. Chances are good the general managers of many small companies are likely to leave whenever they find a better opportunity. Smaller companies also face the ongoing challenge of their owners always working to retain their senior management teams.

State-owned culture
State-owned companies are connected to the Chinese government. Some in more ways than others. Whenever China’s government defines a policy or plan, state-owned companies play an active role in its adoption and execution.

State-owned companies therefore must also consider political navigating when making decisions. They must take into careful consideration political objectives, maintaining harmony in society and the livelihoods of others so that any decisions state-owned enterprises make align with the strategy set forth by government.

An example of this took place during the Beijing Olympics. Olympic campus visiting tickets were allocated to state-owned companies. Employees from state-owned enterprises were then organized to visit the Olympic campus to help boost national patriotism and Olympic spirit among Chinese citizens.

As one might expect, there is a greater sense of control than service in state-owned companies.

Management feels the need to illustrate direction and control the team’s execution.

It is always the manager who speaks first, and the most, in meetings or during negotiations.

Employees in state-owned companies in China tend to listen more and speak less during business hours. When they do speak, it is important that they provide accurate and proper information that complies with management’s direction.

This sense of control is more important than brainstorming to state-owned enterprises.

When dealing with Chinese state-owned companies, you should position yourself as a helper. In addition to your objectives of closing the deal and getting a good price, your objectives should also include successfully positioning yourself in way so that the state-owned company sees you helping the enterprise, and more so Chinese society in a way that helps society make progress along its own pathway to development.

Your chances for success are more likely if you align your objectives with those of the state-owned enterprise.

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