In the late 1970s, China experienced dramatic reforms in terms of changing plan oriented economy into market oriented economy. Under the reform and opening up policies, many foreign enterprises recovered their enthusiasm and confidence of investing in China over the past decade (Cooke, 2004; Farley et al, 2004). During the several years, foreign direct investment in China was averaged around $40 billion yearly. Since 2002, China has replaced the US to, becoming the top recipient of foreign direct investment in the World. Currently, foreign owned enterprises have taken the important roles for China’s economy growth (Tsui and Lau, 2000). Generally, the large amount of population and cheap labour forces, the consistently growing consumptions and many preferential policies are the drivers for foreign owned companies to invest and they think their development in China is limitlessly potential.
However, under the Chinese context not all foreign companies gained success. Facing the differences of cultures, labour markets, and political and legal systems et al, localisation has become the main concern for many foreign companies doing business in China (Jones, 1997). While the development of localising management, many foreign firms are hiring local employees, thus the issues relating to HRM area have become the new challenge for foreign firms. Many foreign executives believe managing people effectively is the greatest challenge and opportunity for getting success in diverse host countries (Ahlstrom, 2001).
Thus, the purpose of this paper is studying the key issues of managing host country employees faced by foreign firms while operating in China. Firstly, the paper will briefly review the HRM in China to identify the main management environment and problems. Meanwhile, localising management will be observed. Then the main HRM issues: staffing, recruiting, training, appraising and retaining with which the foreign companies are dealing will be...
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