The Danwei System in China. Can Corporate Social Responsibility Make Up For Its Exodus?

Seminar Paper, 2010

18 Pages, Grade: 1,0



1. Introduction

2. Social Security in China
2.1 The Exodus of the "Danwei" System
2.2 The Status Quo of the Social Safety System in China

3. Corporate Social Responsibility in China

4. Contrasting Social CSR- and Danwei Benefits in China
4.1 CSR Intensity in China
4.2 Social Security Contributions of CSR in China

5. Conclusion



1. Introduction

"Business as we know it is new in its broadening scope, new in its social significance." (Brass Center 2007: 1)

There is no other country which embodies the achievements and drawbacks of globalization as evidently as the Peoples Republic of China (zhonghua renmin gong heguo 中华人民共和 国; hereafter PRC). Within the last 30 years, China became the fastest growing national economy of the world weekly attracting more than one billion USD (Power 2004). Even though its "march" has just begun, the PRC nowadays already has grown to the world’s third biggest national economy bringing great prosperity to the few and vast hardships for the many. China’s economic ascension did not only create a thin middle- and thinner upper class with unprecedented purchasing power, but also triggered far-flung political and social transformation processes. The magnitude of future social challenges, originating from a transformation of the economic order from a planned economy to a "socialist economy with Chinese characteristics" (He 2001: 387), yet remains unpredictable and imponderable. Over the last three decades, the state’s retreat from social responsibilities, as practiced and introduced by Mao Zedong 毛泽东 before 1978, went along with Chinas radical economic transformation. With China’s “economic liberalization” came the abolition of many Maoist social structures, benefits and socialist societal elements (Cho 2005: 106). Social security, for decades taken care of by the countrywide state run "Danwei-System" (danwei xitong 单位系 统; hereafter DWS) and "People’s Commune System" (renmin gongshe 人民公社; hereafter PC), vanished for the greatest part of China’s population. Aggravated by the privatization of many unprofitable state-owned enterprises (guoyou qiye 国 有 企 业 ; hereafter SOE) the Chinese government tries to gradually transfer the responsibility for social security not only to the individual itself, but more importantly to the private sector.

With the private sector being the growth engine of the country’s gross domestic product annual growth rates, the Chinese government claims that growing economical power of private actors goes hand in hand with an increase in their social responsibility for people within their economical realm. In light of the above there is a huge ongoing debate about Corporate Social Responsibility (shehui qiye zeren 社会企业责任; hereafter CSR) not only in China but also in developed countries. It is undisputed among social scientists that the private sector has to contribute to social safety up to a certain extent. In developing countries, and especially in China with its still officially socialist government which by ideology is the caretaker of the people, the private sectors ability to provide support for a widespread social safety net can still be doubted. Looking at China as an emerging market, it is mostly multi- national enterprises (kuaguo qiye 跨国企业; hereafter MNE) which engage in CSR practice. But what can MNE in China accomplish in terms of compensating lost public social security benefits for their employees?

This paper will examine changes in the China’s social order and structure beginning with the reform period (gaige kaifang 改革开放) induced by Deng Xiaoping 邓小平 focusing on the DWS. Subsequently CSR in China is assessed. Followed by a comparison of benefits the DWS provided and CSR can provide, it is concluded if, or up to what extent, CSR can compensate social benefits the former DWS supplied to its beneficiaries.

2. Social Security in China

Nowadays the present social safety system in China has nothing to do anymore with the pre- reform Maoist understanding of social security for the revolutionary masses. The systematical integration of every individual into a system taking care of all basics needs throughout life had to give way to the necessity of economic viability which was triggered by China’s reform policies since 1978. With millions of people starting to work for private entrepreneurs they were no longer socially insured by their previous working units. In addition, pressured by the new necessity of profitability, more and more state owned enterprises were crushed by market forces leaving their employees without social benefits. Even though the market reforms of the 1980s achieved a general poverty reduction among Chinese peasants, rapidly growing income gaps between rich and poor can be mentioned as only one of the many drawbacks of diminishing state run social security in China (Cho 2005: 123). Examples like the present number of migrant workers, who are on the steady move in order to find employment, equaling the population of Mexico, stunningly illustrates the black whole of social security the retreat of the Chinese government from social matters created in the PRC. For most people in China, the government’s goal of creating a "society of small prosperity" (xiaokang shehui 小康社会) still remains out of reach.

2.1 The Exodus of the "Danwei" System

"In urban China people would say that one can be without a job, but not without a Danwei" (Lv & Perry 1997: 3)

For a long time the essential prerequisite in urban China for "survival" was not considered to be employed, but being a registered member of a Danwei. The Danwei, being a cluster in the hierarchy of state owned workplace units, was one of the primary structural entities which segmented and organized Chinese societal order and stability. For publicly employed workers the Danwei provided almost all encompassing social benefits. By contrast, albeit not of the same quality and sophistication compared to urban Danweis, people on the countryside organized in PCs enjoyed comparable benefits (Lv & Perry 1997: 8). Besides basic services like housing and meals, the Danwei also provided its employees with collectively used establishments like recreation facilities, nursery schools and schooling for the workers children. On top of that workers being a Danwei member did not have to worry about health insurance as they were lifetime covered by the Danwei’s healthcare plan (Hebel 1997: 193). In addition, besides earning "wages", all Danwei members were signed up for the Danwei’s retirement plan (Hebel 1997: 193). Apart from that every Danwei had a Chinese Communist Party (zhongguo gongchandang 中国共产党; hereafter CCP) branch which was in charge of political education of its members (Hebel 1997: 193). Not only after schooling, but also during their work life, Danwei members had to attend regular political education classes in order to stay in aligned to the present party line. Chinese who grew up in their Danwei considered it being their home and extended family in which they lived from birth to death (Lv 1997: 164). The policy of not being able to move to another Danwei freely enabled the CCP branch to monitor the working unit’s employees social and ideological behavior closely, "wielding an assortment of sanctions and rewards to encourage politically acceptable behavior" (Lv & Perry 1997: 3). Lv described the basic idea underlying the DWS as the following:

"Da fast alle sozialen Funktionen in der Danwei integriert sind, ist sie in der Lage Ihre Mitgleider von sich abhängig zu machen und ermöglichte damit eine perfekte soziale Kontrolle und die Effektivität der Durchsetzung des Herschaftswillen." (Lv 1997: 164)

The CCP therefore was through making the Danwei the "center of social activities" (Lv & Perry 1997:4) creating a dependency of its workers on it. Thus the CCP was able to inhibit large scale organized oppositions and protest movements which are nowadays, albeit their ineffectiveness, very common in China (Lv & Perry 1997: 8). By making the DWS, or PCs respectively, the primary unit of Chinese pre-1978 society, the Chinese government trapped its citizens into a societal system which for its workers provided the only and all encompassing source of satisfaction of one’s needs in terms of nutrition, health care and pursuit of private happiness like marriage or having children.

The end of Chinas political and economical isolation since the late 1970s entailed fundamental changes in its societal, administrative and economical order. With inducement of gradual market liberalization by the CCP, many entrepreneurial minded Chinese who possessed sufficient resources grasped the chance to set up their own businesses. The majority of China’s ordinary people thou was stuck with no monetary savings and the dependency on their Danwei or PC for social benefits. With inflow of foreign direct investment (waiguo zhijie touzi 外国直接投资; hereafter FDI) and the transformation of a planned economy to a rather "market-rule" based economy, and therefore a more and more meritocracy based economic structure, competition, the profit motive and productivity quickly became key issues. Those new criteria placed a heavy burden especially on China’s SOEs. On the one hand many of them simply defaulted, on the other hand many were privatized. Only the biggest and profitable SOEs were still backed by the government and could continue their business. With this groundbreaking transformation of China’s pre-1978 economy, the basis for broad scale social coverage of the population was eliminated as well. Rural areas in China suffered the most, as for them, the "dissolution of the DWS" eliminated the entire institutional framework for their basic social benefits (Cho 2005 :134). Due to the parallel dissolution of rural PCs, people were given a small amount of land which they could cultivate for living. People without family were covered by the governmental program of the "five guarantees" (wubao 五保) securing food, clothing, housing, health care and burial (Lv & Perry 1997: 8). Hebel decribes the crucial challenges originating from China’s market transformation as the following:

"Das Vorantreiben der Betriebs - und Arbeitsreform im Staatsektor, die Enstehung von Beschäftigung in Privatunternehmen und verschiedenen Formen von Join-Ventures, die neue Selbständigkeit und vor allem die gestiegene regionale Mobilität führten in der zweiten Hälfte der 80er Jahre zur Entstehung neuer Beschäftigungsverhältnisse ausserhalb des sozialistischen Sektors und zu Betriebswechseln, die von dem alten Sozialsystem nicht mehr gedeckt waren. Ferner entstanden als Folge der Reform früher unbekannte Risiken, wie das der offenen Arbeitslosigkeit." (Hebel 1997: 191)

"The new deal" in China virtually shattered not only all former administrative structures providing social security for its members, but also created new problems unknown to the former Maoist economy like unemployment, labor migration and rampant corruption. The times of "perfect socialist order" under the DWS and PCs are at least since the mid 1980s over in China. People from all walks of life were suddenly faced with financing all their childcare, healthcare and pension expenses out of their own pocket. An impossible task considering the amount of an citizen’s average income and the lack of experience and knowledge about such issues originating from being 100% "taken care of" by the former working unit.


Excerpt out of 18 pages


The Danwei System in China. Can Corporate Social Responsibility Make Up For Its Exodus?
Berlin School of Economics  (IMB Institute of Management Berlin)
Cultural and Political History of China and Europe
Catalog Number
ISBN (eBook)
ISBN (Book)
File size
616 KB
Danwei, China, CSR, social net
Quote paper
Philipp Stiebeling (Author), 2010, The Danwei System in China. Can Corporate Social Responsibility Make Up For Its Exodus?, Munich, GRIN Verlag,


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