From Interpretation to Hermeneutics: A Reflection and Reconfiguration of the Wage Concept in State-Owned Enterprises in Old Industrial Bases

Author: Wang Chen ^*

Although wages are not purely a legal concept, they nonetheless exhibit a high degree of complexity within labor relations and represent a fundamental category that both labor law and bankruptcy law must address. Any conceptualization of wages that is constructed solely from factual elements risks undermining the protective function of labor law in safeguarding workers’ wage rights. In today’s rapidly evolving socio-economic environment, the dilemma of defining wages can be resolved only from a functionalist perspective—namely, by placing principles at the forefront of conceptualization and subjecting them to legal value assessment, thereby establishing a novel logical framework of “principles-concepts-institutions-order.”

The bankruptcy proceedings of state-owned enterprises in old industrial bases are, at their core, debt-restructuring and social governance processes conducted through judicial channels. This inevitably leads to the governance dilemma of “addressing diachronic issues in a synchronic manner.” For a long time, the social governance function of bankruptcy law has drawn considerable attention from all sectors of society. For individual workers, the bankruptcy proceedings of state-owned enterprises in old industrial bases differ significantly from typical restructuring procedures; indeed, these proceedings often represent the “last line of defense” for protecting their rights and interests. If the concept of “wages” is not accurately understood, it becomes impossible to effectively safeguard their interests, to clearly define the subjects entitled to existing wage rights, or to place individual workers’ rights within the specific historical and spatial context they have experienced. This can result in an imbalance of rights among worker groups, leading to legal injustice and a disconnect between legal outcomes and socio-political effects—thus undermining the practical grounding of the law and inflicting “legitimized harm” on worker groups. Therefore, we must seriously confront the “local knowledge” generated by these state-owned enterprises in old industrial bases, thoughtfully reflect upon the concept of wages and its role in constructing external labor rights, and reconstruct a new logical framework for the concept of wages.

(1) The structural pattern of wage interests: from synchronic to diachronic

The role of state-owned enterprises in old industrial bases should be examined holistically within the broader historical context of China’s industrialization process, taking into account their historical contributions and their intrinsic connections with the development of enterprises of other property rights structures in China, so as to achieve a balanced assessment from a wider perspective. Whether in terms of time or space, we must avoid treating the contributions of the workforce—including those who have already retired—as if they were confined solely to individual enterprises. Instead, we need to take into account the social context, political conditions, ideological trends, and external environmental changes (such as rising prices) prevailing at the time. When bankruptcy proceedings address workers’ issues in a “comprehensive” manner, the structure of workers’ interests—especially their wage income—must factor in the “diachronic” elements that are embedded within them. For instance, some state-owned enterprises have long continued to pay retirees wages outside the unified system; this practice has specific historical roots. Although these enterprises and the retirees no longer maintain any labor or personal-subordination relationship, such payments can still be regarded as deferred wages. In the early days, workers in state-owned enterprises in old industrial bases had an understanding of labor relations that somewhat resembled Japan’s “long-term employment model” of employment stability. The retirement allowance is a distinctive feature of Japan’s pension system, and it is “generally considered to be both a form of deferred wage payment and a reward for years of exemplary service.”

Moreover, regarding the issue of wages and benefits for retired and soon-to-be-retired employees, not only is China’s bankruptcy legal practice still in the exploratory stage, but the tax administration also has a similar experience. The “Notice from the General Office of the State Administration of Taxation on Strengthening the Rectification of Common Tax Risks at Designated Enterprises under the Jurisdiction of Certain National Tax Authorities” (Tax General Office Letter [2014] No. 652) stipulates that expenditures on wages and benefits for retired personnel, which are not directly related to the enterprise’s income generation, may not be deducted before corporate income tax. If such expenditures have already been accounted for as welfare expenses, they must be adjusted upward for tax purposes during the annual corporate income tax final settlement. Meanwhile, prior to the issuance of this notice by the State Administration of Taxation, certain local authorities—such as the “Letter from the First Division of Tax Policy of the Ningbo Municipal Local Tax Bureau on Clarifying the Interpretation of Certain Issues Related to Income Tax”—had already provided guidance stating that although retired personnel no longer provide labor services to enterprises and should therefore be covered by the social security system, given that China’s current social security standards remain relatively low, enterprises’ payment of extra-bundled expenses for these retirees essentially amounts to deferred welfare payments. The “Notice from the Dalian Municipal Local Tax Bureau on the Coordination of Several Tax-Related Matters Concerning Corporate Income Tax” further clarifies that expenses—including heating allowances (heating fees) and medical expenses (for retirees not yet covered by unified medical care)—paid or reimbursed by taxpayers to retired personnel are allowed to be deducted before tax based on actual amounts incurred. From the perspective of this article, if the taxpayer is an enterprise located in an old industrial base, then the regulations adopted by localities such as Ningbo and Dalian appear more reasonable.

(2) The Intrinsic Logical Tone of Wages: From Subjectivity to Inter-subjectivity

The most central task of modern society, underpinned by subjectivity, is to liberate individuals from the constraints of human nature that prevailed during the Enlightenment era, thereby allowing their subjectivity to fully flourish. This Enlightenment philosophy—grounded in subjectivity—has profoundly influenced contemporary legal practice. The scope of employees’ claims in corporate bankruptcy proceedings vividly exemplifies this subjective character: Article 48 of the Enterprise Bankruptcy Law stipulates that the administrator’s investigation into the scope of employees’ claims is entirely centered on the interests of current employees as the primary stakeholders, treating different types of workers as isolated individuals. In bankruptcy proceedings involving state-owned enterprises in old industrial bases, many employee demands go beyond mere claims based solely on the Labor Contract Law or individual labor contracts; rather, they often incorporate demands intertwined with systemic reforms and policy changes. Consequently, the underlying power dynamics are no longer confined to the simple relationship between individual employees and the debtor enterprise. Instead, the boundaries have expanded to encompass various creditor groups, and these dynamics are deeply embedded among the parent entities of state-owned enterprises, government departments, and restructuring investors. If these issues are not properly addressed, once judicial proceedings conclude, the problems will simply be passed on to society at large, making it exceedingly difficult to achieve the comprehensive governance objectives that the Bankruptcy Law seeks to realize.

Inter-subjectivity refers to the mutual relevance and interconnectedness among individuals as subjects in their objectifying activities. As a relational category, inter-subjectivity signifies the interactions, connections, influences, and effects among multiple subjects in a situation where several subjects coexist. Inter-subjectivity transcends the limitations of individual rationality and facilitates a reconstruction of rationality itself. On the one hand, this reconstruction of subjectivity emphasizes that interacting subjects should uphold and affirm their own subjectivity, the uniqueness and distinctiveness of their own subjective activities. On the other hand, it also stresses that within this uniqueness and distinctiveness, subjects must maintain and affirm their own subjectivity and the common humanity and universality shared with other subjects—recognizing that all human beings, whether active workers or retirees, former streamlined personnel from the 1960s, veterans injured at work, or dependents of employees in special circumstances, are united in their fundamental identity as human beings and equal participants in the creative endeavors of humankind. The above-mentioned text holds great reference value for reconstructing the “inter-subjectivity” of the workforce in state-owned enterprises located in old industrial bases. On the one hand, we should pay close attention to the “subjectivity” of current employees, safeguarding their statutory rights and interests. On the other hand, we must also focus on groups such as retirees, former streamlined personnel from the 1960s, veteran injured workers, and dependents of employees in special circumstances—from the perspectives of “commonality and universality” and “equality and unity”—thereby shifting the approach to the resettlement of workers from these state-owned enterprises in old industrial bases, which have undergone bankruptcy proceedings, from a unidirectional understanding and construction toward a bidirectional dialogue and communication.

(3) The Open Judicial Arena of Wages: From Legal Construction to Social Construction

To grasp the concept of employee wages in old industrial bases, we can no longer be satisfied merely with the technical requirement of “subsumption” when applying the law, nor can we limit ourselves to constructing a legal framework solely around the concept of wages. Rather, we must gain a deep understanding of the social forces underlying this concept. Given the mass involvement characteristic of bankruptcy cases—especially in large state-owned enterprises that still carry strong political undertones—judges and administrators will inevitably find themselves constantly shuttling back and forth between various policies, legal norms, and external realities, all while operating within the constraints of the factual situation as it appears on paper. From this process, they will form their initial assessments of each case, then take into account the potential consequences of these assessments and their implications for the future. On this basis, they will coordinate relationships, weigh pros and cons, and continually refine their approaches—seeking to achieve a harmonious integration of legality and legitimacy and thereby realizing the goal set forth in Article 1 of the Enterprise Bankruptcy Law: "safeguarding the order of the socialist market economy." Although this reflects the competence and capabilities of courts and administrators, at its core, it is determined by the structure and form of society itself—a product of society. All participants in judicial proceedings are simply fulfilling the tasks assigned to them by society.

In the interplay between social change and individual actions, the institutional provision of law—by delineating the boundaries of interests and establishing a balance among different actors—is crucial not only for each individual’s experience of justice but also for ensuring that the law fully takes into account the context of social change and avoids placing the entire burden of social transformation squarely on individuals. Examining bankruptcy cases involving state-owned enterprises in China’s old industrial bases reveals that various stakeholders are profoundly constrained by the implicit rules governing their respective “fields.” In specific cases, certain non-institutional factors—such as interest-balancing measures adopted out of considerations related to social stability—are incorporated into the statutory mechanisms for distributing interests, thereby fulfilling the law’s function of shaping society.

(4) The Position on Defining the Scope of Wages: From Interpretation to Hermeneutics

The intent of the legislator can be ascertained through linguistic interpretation, systematic interpretation, and historical interpretation. Without specific interpretations, clarifications, and applications of the law in judicial practice, the law would become nothing more than a mere piece of paper. The stance of legal hermeneutics emphasizes a scientific, empirical, and analytical disciplinary foundation; it underscores the normative character of statutory provisions as the object of interpretation; and it highlights the certainty of the law. From the perspective of China’s legal practice, in a rule-of-law environment that is fully “market-oriented,” the scope of employee claims stipulated in Article 48 of the Enterprise Bankruptcy Law is clearly defined, and the conceptual connotation and extension of “wages” are essentially clear. Moreover, the general public can readily accept judicial rulings that define the scope of wages in light of current circumstances. However, when it comes to the bankruptcy of state-owned enterprises located in traditional industrial bases, unique Chinese national conditions and rich “local knowledge” come into play, necessitating a re-examination of the meaning of the term “wages.” At this juncture, we cannot simply seek to ascertain the original intent of the legislator; rather, we must engage in a dialogical process with the legislator, creatively constructing law through such dialogue, so that norms and individual cases can mutually adapt to one another and arrive at a reasonable and acceptable conclusion. This requires adjudicators to repeatedly cycle between facts and norms, grounding their judgments in intersubjectivity and thereby forming a coherent legal system that integrates principles, concepts, institutions, and order. It calls for substantive judgment, ultimately ensuring that each employee’s wage claim and related rights are legally protected, thus breaking through the temporal constraints on the understanding and determination of the concept of wages.

The “basic image” of contemporary Chinese judicial decisions on legitimacy reveals a shift from mechanical justice/formal rationality toward a sociological justice/practical rationality that emerges from modernity’s reflective inquiry. From the perspective of legal hermeneutics, the legal text is not an autonomous object; rather, it always communicates itself to those who apply the law. The law is more like a court—each time a case is adjudicated, a new interpretive score unfolds. Reading and applying the law is never merely a matter of pure replication or reiteration; it is always an act of creation. State-owned enterprises in old industrial bases are, in fact, units characterized by a “community of acquaintances,” lacking the abstract, procedural features of a modern society. Many traditional understandings of groups do not naturally extend their applicability to these contexts. The bankruptcy of state-owned enterprises in old industrial bases essentially resolves multiple rounds of interest balancing in one fell swoop; yet “marketization” has its own specific limits of applicability. In these enterprises, many issues that once arose are now unimaginable: long-term furloughed workers, veterans injured on the job, personnel streamlined in the 1960s, coordinated off-scale wages for retired employees based on rising prices, early retirement schemes, and employees placed on unpaid leave with suspended salaries—all these constitute a living reality that cannot be ignored during restructuring and must be squarely confronted and resolved. “In weighing interests in specific cases, only by situating the particular interests of the parties within a hierarchical structure of interests can we ensure that the balancing of interests is both fair and appropriate.” The reflection upon and reconstruction of the concept of wages test the judiciary’s capacity to respond effectively both to individual cases and to broader social realities. Adopting an interpretative stance that pays historical attention to and humanistically interprets the concept of wages, we place the determination of the wage scope in a cyclical interplay between facts and law, thereby achieving individual justice while maximizing social effects within the legal framework and ensuring that legal outcomes are tested against and endorsed by societal norms.

Attorney Profile:

Wang Chen

Senior Partner at Liaoning Tongfang Law Firm, with primary practice and research areas including debt restructuring, corporate law, and competition law.