Over the past five years since the implementation of the Labor Law of the People's Republic of China on January 1, 1995, a labor contractual employment system conforming with a modern enterprise system has been comprehensively established in China.

The number of workers involved in the labor contractual system in urban State-owned, collectively owned and foreign-invested enterprises nationwide has totaled 98.1 percent of the gross workforce, the number of contracted workers in privately run enterprises has also increased significantly, the work of signing collective contracts through group consultation has advanced steadily, the number of collective contracts examined and approved by labor protection administrative departments nationwide has hit 180,000. According to the plan, by the end of 2000, the labor contractual system will have been instituted in all types of appropriate employing units.

It is reported that the labor contractual system is one aspect of the core of the Labor Law. The establishment of this system indicates the labor relationship featuring China's socialist market economy has been initially set up. The tie between the laborer and the employing unit has changed from the original administrative relationship into an equal contractual one between two main bodies. The laborer, who voluntarily signs a labor contract on an equal footing, has become a dynamic factor on the labor market; the employing unit should both properly exercise its decision-making power over employment, organize the laborers into production, and fully respect the lawful rights and interests of the laborer; the State protects the legal rights and interests of both the employing unit and the laborer through regulating and properly supervising the labor market, so as to achieve the aim of rational allocation of labor resources.