Up to now, very little is known about human resource policies in Sino-foreign joint ventures and foreign subsidiaries in China. It is, therefore, the aim of this project to study variations in personnel strategies in order to find an economically reasonable explanation for the differing personnel policies. In view of the increasing significance of labour relations law in China, another aim of this project is to examine the relevance of labour regulations in companies with foreign equity participation: When do those concerned rely on legal methods and to what degree are they successful? As only very few studies currently exist, the necessity for collecting our own sample soon became evident. Since not only quantitative, but also qualitative data is required, the case study approach suggests itself as an appropriate starting point. In October 1998 eleven companies in Shanghai were interviewed. This will then be followed up by case studies in two other regions of China in the summer of 1999. The case studies in Shanghai revealed some evidence for the hypothesised dependence of the personnel policy on the product market strategy of the company: The effective use of the redundant cheap labour force in China requires that the firm employs relatively labour intensive production lines. As long as labour laws are not violated, the prices of products manufactured in Shanghai will however often be undercut by Chinese competitors from other regions. Therefore, profits from mass-produced goods can mainly be realised in the export business. In contrast to price-based competition, firms with a differentiation or niche strategy compete on some other dimension that is valued by the market (e.g. product quality, reliability, delivery, service). Whether the company is successful with this strategy depends a lot on its capabilities to implement effective policies to retain qualified employees. Therefore, a differentiation strategy cushions the impact of external market forces more than a mass-production strategy, which tends to be a primarily market-oriented personnel policy.