Decentralization and Compensation Reforms in China: The Case of Xiaoshan InterTrade

Chinapsilas economic reforms have succeeded in bringing the desired benefits, particularly in its numerous State-owned Enterprises (SOEs). How such reforms are affecting the management of SOEs and their employees are the concerns of this paper. The findings of a triangulated work of survey-interview-document are as follows:(i) SOEs have been operating in a competitive free market environment;(ii) the compensation system has become adaptive to actual conditions;(iii) employees are yet to receive full benefits from the compensation reforms, feeling inadequately paid but favoring the compensation structure. The authors suggest (a) caution in carrying out the performance-based compensation system, giving particular attention to possible equity and revenue irregularities to increase profit figures, and (b) salary adjustments based on nature of work and inflation effects to purchasing power of employees.