China’s socialist employment system has undergone radical changes since the 1990s along with enterprise restructuring. Surplus workers have been laid off from state-owned enterprises in large numbers. China’s policy program for the management of layoffs in this process of enterprise restructuring has been evaluated as an example of ‘good practices in labor administration’. In this paper, we use original field data collected in Beijing, supplemented by additional information from recent Chinese studies, to assess this evaluation. We apply for this purpose the criteria often used by development agencies to evaluate governance systems, namely, accountability, transparency, consistency, participation, and information flow. Using these criteria as a yardstick, we argue that the Chinese experience in reforming their employment system through massive layoffs and re-employment is better characterized as a classic case of ‘muddling through’ rather than a shining example of ‘good governance’.

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