The significance of Guanxi

In order to understand Guanxi you have to look at the environment in which it was conceived. China was for three decades a communist country. During the chaos of the Cultural Revolution adults and their children faced being sent to the countryside or had the constant threat of denunciation. Individuals relied on the exchange of gifts and favours among personal connections to find ways to deal with these social crises.(GUTHERIE 1998) He suggests that Guanxi and gift giving have evolved together and work along side each other. The term business as we know it today did not exist. People worked for the state meeting quotas and in return their immediate needs were accommodated by their work unit. Having good relationships with people was also a way of gaining things that were not made available to you. While a market economy emphasises marketing, financial and operational savvy, the planned economy places more importance of government relationships and Guanxi.(GULAIT and LEE 2004) Under Mao Zedong Guanxi thrived as a way of allocating investment in the absence of a market. Geoffrey Murry suggests it stems back further 'during periods of strong rule, imperial powers reached into the furthest corners of the Chinese empire. The exercise of this power was arbirary and brutal; the mandarin was both prosecutor and judge. A separate judiciary was never established, and hence the ordinary person never looked to the law to settle his grievances.' He suggests that this tradition of looking around the law for the solution has carried on. If obligations of a person take over civic duty in order to satisfy Guanxi then is this not corruption? If one were to focus directly on Guanxi being reminisant with corruption then one would miss the positive implications Guanxi evokes.

In order to educate a foreigner on Guanxi you have to look at the context in which it is used. Guanxi is not generally used to describe relationships within a family or with friends. Anthropologists and theorists alike will try and depict differences in social interaction between countries. Research by Hofstede (1988 ) into organisational culture in the international arena shows that Chinese people's short term orientations are that of protecting face, respect for tradition and reciprocal greeting and favours. He classifies theses as Confucian dynamism. Further observations have been made to try and distinguish Chinese culture characterists. How the Chinese view time. That they do not hurry decisions negotiations take longer then in the West. There feelings of ambivalence towards foreigners some distrust and aloofness pulling against their attraction for material things which developed countries can offer, they can be enthusiastic about proposals and foreign products one moment and then the next turn defensive about Chinese superiority the next. Bringing these observations to light shows the complex nature of people from different regions. These observations are carefully recited by foreigners wishing to do business in China. They do this to attract and maintain good relationships with the Chinese. The relationship is not just between companies but also between individuals at a personal level. The relationship is not just before sales take place but it is an ongoing process. The foreign company has to maintain the relationship if it wants to do more business with the Chinese.

To conclude

Guanxi has its advantages as well as disadvantages. Underhanded help can often prove quicker and cheaper alternatives to following formal procedures. Although when something goes wrong, the relationships are challenged and could quickly disappear. Guanxi can also be very one sided. Where Guanxi is involved, there is a risk of having to repay a favor twice the amount you bargained for.

What many people fail to realise is that every country has its unique cultural differences Everybody is culturally bound and is limited in his/her own knowledge of other cultures(QING CAO 2007) What is classed as different to the English society may be common unwritten procedures in china. If we sick by our translation then does this 'connection' and 'relationship' find its way into every business practice? If this is the case what makes Guanxi distinguishable as Chinese? Is it not a true saying that money speaks the same language therefore Guanxi is irrelevant? The subject has proven to be very ambiguous in defining. To say that Guanxi is insignificant would be false, but with the increased accession into a market economy, I believe Chinas dependency on Guanxi will ease. With China joining the WTO they are making huge efforts to modernize their legal structure. In China today powerful economic enterprises are paying more and more attention to the laws, rules and regulations that are part of the emerging newly developed Chinese state.

Guanxi posses more questions that it answers. All I can conclude is to call attention to what Guanxi is, but not to why it accurse. That is a question for political scientists, which I am not.

The significance of Guanxi is dependant on who you are and what you hope to gain from China. Try as we might to try and compare it to something a little closer to home. I believe Guanxi is truly unique to china.

Reference list

BURNS, R (1998) doing business in asia Addision Wesley Longman Austrailia Limited

GEOFFREY, M (1994) Doing Business in China. China Library

GULATI, D, A and LEE, Y, A kellogg on China. Kogan Page Limited

GUTHRIE, D (1998) The significance of Guanxi in chinas economic transition, The China Quarterly, pg 255

REVUVID, J and YONG, L (2005) doing business with CHINA Kogan Page Limited

Wikipedia

(2007) definition, Guanxi [online]

Available at: http://en.wikipedia.org/wiki/Guanxi

[Accessed on 18th April 2007]

The ancient practice of Chinese social networking

(2002) Guanxi and social network theory [online]

Available at: http://emergence.org/ECO_site/ECO_Archive/Issue_6_1-2/Hammond_Glenn.pdf

[Accessed on 18th April 2007]

Bibliography

China-Britain Business Council

(2005) China Guide: Business & Culture [online]

Available at: http://www.cbbc.org/china_guide/b_culture.html

[Accessed 5th March 2007]

GOULDNER, A.W. (1960) The Norm of Reciprocity: A Preliminary Statement. American Sociological Review, 25/2: 161-78.

HODDER, R. (1996) Merchant Princes of the East. John Wiley and Sons.

KENNA, P and LACY, S. (1994) Business China: A Practical Guide to Understanding Chinese Business Culture. Passport Books.

MONK, P. (2002) 'Coming to the party Transparency in the political and economic life of China,' Australian Review of Public Affairs, 26 August.

REUVID, J and YONG, L. (2005) Doing Business with China. 5th Edition. GMB Publishing Ltd.

Maxine Sharples

270066

Chinese Business Environment and Communications

LNGCH2025