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GUANXI’S CONSEQUENCES: PERSONAL GAINS AT SOCIAL COST

Journal of Business Ethics, Volume 38, Number 4 / July, 2002, pp. 371-380

YING FAN

Department of Marketing

University of Lincoln Brayford Pool

Lincoln LN6 7TS ENGLAND

Tel 44-1522-886345 Fax 44-1522-886032

Email [email protected]

GUANXI’S CONSEQUENCES: PERSONAL GAINS AT SOCIAL COST

ABSTRACT

Is guanxi ethical? This question is largely ignored in the existing literature. As guanxi

has an impact on the wider public other than the guanxi parties, it must be studied in

the context of all stakeholders. This paper examines the ethical dimension of guanxi

by focusing on the consequences of guanxi in business, from ethically misgiving

behaviour to outright corruption. Guanxi may brings benefits to individuals as well as

the organisations they represent but these benefits are obtained at the expense of other

individuals or firms and is thus detrimental to society. It can be argued that guanxi is

an inevitable evil under the current political and socio-economic systems in China. Its

role and importance in business life will be diminished as the country moves towards

an open market system.

KEY WORDS: Guanxi, relationship, business ethics, corruption, China

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GUANXI’S CONSEQUENCES: PERSONAL GAINS AT SOCIAL COST

INTRODUCTION Guanxi, a Chinese term referring to interpersonal connections, has been receiving

growing research interests in the western management field. In the existing literature,

guanxi has been identified as one of the most important success factors in doing

business in China (Yeung and Tung, 1996; Abramson and Ai, 1999); regarded as a

source of sustainable competitive advantage (Tsang, 1998; Fock and Woo, 1998);

linked with some western concepts such as relationship marketing (Ambler,1994;

Simmons and Munch, 1996), and extolled as the future direction for the western

business practices in the new century (Lovett, et al 1999).

Despite the growing number of publications on guanxi and the benefits guanxi is

alleged to bring to business organisations in terms of cost reduction and enhanced

performance, there is still considerable confusion around the concept as well as its

function in business. Whether guanxi is ethical is a particular issue largely ignored in

the previous studies. This paper aims to examine the ethical dimension of guanxi,

with a focus on the consequences of guanxi. It starts with a discussion of the guanxi

concept and different types of guanxi, followed by a detailed analysis of the role that

guanxi plays in business and its consequences to the society.

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DEFINING THE CONCEPT

The term guanxi in the Chinese language has multiple meanings. It could refer to one

of three things: (a) the existence of a relationship between people who share a group

status or are related to a common person, (b) actual connections with and frequent

contact between people, and (c) a contact person with little direct interaction (Bian,

1994). Guanxi is commonly defined as special relationships two persons have with

each other (Alston, 1989). Osland (1990) adds on: “…a special relationship between a

person who needs something and a person who has the ability to give something.” In

this paper, guanxi is defined as the process of social interactions that initially involve

two individuals A and B. A may or may not have special relationships with B. A asks

B for assistance (favour) in finding a solution to a problem. B may have the solution

at hand, or more often, has to seek further assistance from other connections, i.e. starts

another process.

This definition presents a significant departure from the literature. Firstly, it

emphasises that guanxi is a dynamic process which begins with the two persons but

may involve more parties at later stages. Secondly, in a guanxi relationship, one

person (B), in most cases, may not have the solution even though s/he is eager to grant

a favour. B has to search for further connections in order to find the solution. This is

exactly what guanxi means. Here B’s role is a facilitator or matchmaker, rather than a

solution-provider. Thirdly, relationships, strong or weak, exist all the time; but guanxi

can only happen when there is a need for something to be done. This need triggers the

guanxi process. Fourthly, guanxi involves a series of activities mostly pre-planned

and carried out between the two or more parties in the guanxi network. Such activities

can include anything from having a meal together, to gift-giving or doing a favour.

Finally, contrary to the conventional definitions, guanxi can occur between two

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persons without any shared attributes (guanxi base). If A and B have special

relationships between them, i.e. they share a guanxi base, a) the guanxi process would

starts more easily or quicker; b) they had guanxi before, the start of a new guanxi

process is just to renew it. If A does not have any special relationship with B, A could

still try to start the process though this would be more difficult. Alternatively, A may

decide to use a go-between C. There are several sub-processes in this case. The

process will not stop until either a solution is finally found or the task is abandoned.

CLASSIFICATIONS

Guanxi is a complex social construct with many variations. In most existing studies,

guanxi is discussed in general terms; complexity and differences between different

types of guanxi are largely ignored. There are mainly three types of guanxi: family

guanxi, helper guanxi and business guanxi. Family guanxi and helper guanxi are

similar to what Hwang (1987) termed ‘expressive ties and ‘instrumental ties’

respectively. Business guanxi refers to the process of finding a solution to a business

rather than personal problem by using ‘personal’ connections. From the comparisons

in Table 1, it is clear that the three types of guanxi are quite different in almost all

aspects: nature, purpose, function and what is exchanged. Family guanxi is rooted in

Confucian values; emotionally driven, qinqing (affection) is exchanged, in which

reciprocity is not always necessary. On the other hand, business guanxi is the product

of current political and socio-economic systems; utility-driven, a deal of money and

power. In terms of quality, family guanxi is stronger, more stable and requires long-

term commitment. Business guanxi, on the other hand, is characterised as tactical,

opportunistic and unstable. There is little trust and commitment in the business guanxi

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relationship (Fock and Woo, 1998). The only thing that matters to the parties is their

own business interests and the utility of other party.

To an individual who has three types of guanxi with different persons, these guanxis

are treated differently in terms of importance, frequency and intensity, and all these

may change over time. It is worth noting that guanxi in reality is far more complicated

as all the three types of guanxi could be intertwined making it difficult to distinguish

between them. It is also possible that guanxi between two parties may evolve from

one type to another over a period of time, or members of a guanxi network share more

than one relationship between them.

CLARIFICATION

To have a better understanding of how guanxi is related to business and how guanxi

distinguishes itself from western concepts, the following clarification must be made.

In the literature, guanxi is frequently referred as the Chinese version of relationship

marketing or business networking (Amber, 1994; Simmons and Munch, 1996; Lovett,

et al, 1999). This is a misunderstanding of the concept. Guanxi, by its definition, is a

kind of personal property: an asset owned by an individual and working only at

personal level. Whether an organisation can use the guanxi assets of its employees is

entirely up to the individual himself. He may use his guanxi (in his private capacity)

to bring benefits to his employer but this guanxi remains as his personal property and

will not become an organisational asset (Tsang, 1998). When the employee leaves the

firm, he takes his guanxi with him. Another fundamental difference between guanxi in

China and a marketing relationship or business network in the west lies in that the two

individuals engaged in guanxi exchanges are often neither buyer/seller nor business

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partners; the relationship is more likely between a businessman and a government

official or someone who has connections with the official. Customers and business

partners may not even be counted in such a guanxi network. In short, guanxi is a

network of private contacts characterised by personal, informal and clandestine deals.

GUANXI AND BUSINESS

Business guanxi is a unique Chinese phenomenon and a product of China’s

contemporary political and socio-economic systems. Much has been written on the

importance of and benefits brought by guanxi, but how guanxi is related to business

and what kind of role guanxi plays in business operations remain largely unknown,

partly because that all three different types of guanxi are tangled in reality, so it is

hard to separate them. For example, should business guanxi be viewed as a) the

practice of general guanxi (“family” and “helper”) in the business sector; or b) a

special type of guanxi that distinguishes itself from the other two types; or c) the

mixture of personal and business relationships? How can business guanxi be defined,

and what characteristics does it have? How is guanxi practised by managers to

achieve their personal as well as organisational objectives? Answers to these

questions are hard to find and beyond the scope of this paper. It is notoriously difficult

to get an insight into a guanxi relationship or transaction as both are shrouded in

secrecy and are not shared with an outsider. The remaining part of the paper will

discuss the impact of guanxi on business, with a special focus on its links with

corruption and consequences to society.

In the existing literature, the role and benefits of guanxi have been grossly

exaggerated and cannot be substantiated. There is no convincing evidence to show

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how and to what extent guanxi is beneficial to business performance. One of the

major benefits that guanxi is believed to offer is obtaining information on government

policies, market trends and business opportunities (Davies, et al, 1995). The following

case shows how such a benefit was actually achieved. The chairman of an Australian

company seeking investment opportunities in China had a good relationship with the

local executive of a large state-owned enterprise, who was a close friend of a key

government official in Shenzhen.

Throughout the entire negotiation process, the executive continuously fed the chairman with prompt information on how the government had viewed the project itself. The chairman was able to make an appropriate presentation based on this input, which led to a successful negotiation outcome (Yau, et al, 2000).

The paper, citing this as a good example of using guanxi, gave no details on what

favours were returned to the Chinese official and the local executive. The behaviour

of the Chinese official and executive had clearly broken rules, if not laws. On the

other hand, the way that the Australian firm used to obtain information is morally

questionable.

Another benefit widely cited is that the guanxi network improves efficiency by

reducing the transaction costs (Davies, et al 1995 and Lovett, et al 1999). However,

recent empirical studies show the contrary: developing and maintaining guanxi

relationship is a time-consuming and expensive endeavour and perceived as a major

disadvantage (Fock and Woo, 1998; Lovett, et al, 1999; Yi and Ellis, 2000). Guanxi is

also said to help credit collection, but the fact is that most companies in China find

themselves in the predicament of bad debts and triangular debts (Far East Economic

Review, 6/7/2000). Under the current market environment in China, guanxi may be

the effective option, sometimes even the only way to make things work, but it is by no

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means efficient or even the cheaper option in the long term. A survey conducted by

the Hong Kong Independent Commission Against Corruption estimated that guanxi

accounted for up to 5% of total costs in doing business in China (ICAC, 1993).

An important character of guanxi that is often overlooked in the literature is that the

intended benefit of guanxi transaction cannot be delivered immediately after the

‘payment’; in some cases, the delivery may never arrive. By definition, guanxi

exchange takes place as informal and complicated multiple processes that often

involve more than two parties. It is largely a future transaction with unspecified

delivery time; and there is no guarantee in terms of the value or quality of the benefit.

This is the paradox of guanxi: does it reduce uncertainty or does it increase

uncertainty? When a firm has a heavy reliance on guanxi to the point that cultivation

and maintenance of guanxi networks consume much of the financial and managerial

resources, the expenses and risks may outweigh any potential benefits such guanxi

could generate. This explains why some companies deliberately try to weaken or

terminate their guanxi relationships, the so called “guanxi evasion” (Chen, 1995).

THE ETHICS OF GUANXI The ethics of guanxi has so far received little attention in the literature. In contrast

with the extravagant claims on the benefits of guanxi, the dark side of guanxi is never

fully understood. Is guanxi ethically acceptable? It depends on the type of guanxi and

the context in which guanxi occurs. While family and helper guanxi are generally

perceived in China as good guanxi that is totally moral or even desirable; business

guanxi is widely regarded as bad guanxi, a grey area even if it is not implicated with

corruption. To the Chinese, business guanxi is inevitably associated with favouritism,

nepotism, unfair competition and fraud. There are countless examples. In 1998

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pyramid selling was banned in China after millions of people lost their lifetime

savings in the bogus selling schemes (McDonald, 1998). In the majority of cases

swindlers deliberately chose people whom they had close guanxi relationships with

(relatives, friends or classmates) as unsuspecting easy targets. Trust was betrayed for

profits. Ironically, when the victims realised the fraud most of them tried to recruit

newer victims in the same fashion in order to recoup their losses. Such scandals

exposed the pernicious side of guanxi.

Guanxi may bring personal gains to individuals, vital resources and cost savings to

organisations. But these benefits are often achieved at the expense of other individuals

or firms, as business guanxi dealings create significant disadvantages to the parties

outside the network, thus stifling competition and being detrimental to the whole

society. In this way, social goods are sacrificed for personal gains. A simple acid test

to judge whether a guanxi transaction is ethical is to find whether there are victims as

a result of such a deal. These victims may be known as the competitor of the firm, or

the customer, or even unknown in some cases. But the truth remains that such guanxi

transaction produces gains for individuals or firms but social loss to the whole society.

A guanxi action is right from the ethics point of view only if there is no third party

either known or unknown that is adversely affected as a result of this guanxi action.

Unfortunately, the vast majority of guanxi cases would fail this test.

The proponents of guanxi defend these practices on ethical relativism by arguing that

guanxi is based on eastern principles, and can be as ethical as any western system

(Lovett, et al 1999). They looked only at one side of the coin. Confucius did set up

principles which govern the interpersonal relations in the Chinese society but he also

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placed greater emphasis on virtue by establishing principles of moral behaviour. He

felt that a person who lived by his rules would develop the habit of ethical behaviour.

Eventually this behaviour would become deeply ingrained in one’s personality. Those

who followed his principles would thus achieve virtue. According to Confucius, one

should always put moral concerns before the pursuit of business interests. Differences

in business norms and legal systems exist between western developed countries and a

developing economy like China, and ethical norms might generally be higher in the

former (Vogel, 1992). However, it is debatable whether the latter would attach less

importance to ethics and would be more prone to corruption. If certain guanxi

practices deemed unethical in the west are currently ‘accepted’ in China, this still does

not justify its existence as morally acceptable, but simply shows that it is the

necessary evil under the current political and socio-economic environment. There is

no country in the world where corruption, in whatever forms it may take, is either

legally or morally acceptable. China is no exception. If anyone obtains personal gains

through guanxi activities at the expenses of others (competitors or general public, the

society), this guanxi should be deemed as unethical even if they did not break the law.

As a matter of fact, the majority of business guanxi practices are totally unacceptable

even by the current Chinese ethical standard. That is why business guanxi has a

terribly bad reputation inside China.

GUANXI AND CORRUPTION

As stated afore, business guanxi is a network of connections between business people

and bureaucrats. In a society with a long tradition of rule by man instead of rule by

law, having good guanxi with officials has always been vital. This special guanxi

relationship between businessmen and officials is aptly termed in Chinese as venal

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guanxi or “qianquan jiaoyi” - the exchange or deal between money and power.

Guanxi is the matchmaker who ties up the two parties in the following diagram:

Money Guanxi Power Corruption

Corrupted guanxi and guanxi-based corruption are like Siamese twins that cannot be

separated. It is safe to say that there is no business guanxi network that is not tinted by

corruption and no corruption without using guanxi. Inside China, guanxi is the

synonym for corruption and other malpractices such as nepotism, bribery and fraud

(Yang, 1994). It is not surprising that in the latest survey carried out by Transparency

International among 19 major exporters in the world, China was ranked the worst in

the Bribery Index (Transparency.com). During the economic reform and opening up

of the past twenty years corruption in China has become so prevalent that it becomes

the cancer of the society. In the middle of the 70s, guanxi meant to obtain scarce

consumer goods or to find a better job for one’s children through the ‘back door’.

Today, guanxi is implicated in all big corruption cases and organised crimes. One

particular feature is that corruption has evolved from individual wrongdoings into

institutional corruption that often involve a complicated guanxi network between

high-ranking officials, businessmen, army/police and mafia. The recent case in

Shenyang led to prosecution of both the mayor and his deputy along with a dozen of

officials. They were accused of accepting bribes of millions of US dollars and having

mafia links. Corruption can be found in any country or economic system, but it is

guanxi that provides a fertile soil in China for corruption to flourish. The central

government has waged and lost every anticorruption campaign as new ‘worst’ cases

are constantly emerging. In the past two years, China executed more than 20 high-

ranking officials, including a vice-chairman of the People’s Congress (the national

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parliament) and a few ministers, the first in the 50 years history of the People’s

Republic. Other big cases currently under investigation include a smuggling ring in

Fujian Province, and a custom fraud in Guangdong Province, with estimated value of

$80 billion and $20billion respectively.

On the other side, it is not uncommon for companies to be forced or even blackmailed

into the guanxi-related corruption. Jakobson (1999) offered a vivid account of

business guanxi in reality. A manager in a private company had to spend tens of

thousands of Renminbi each year improving his guanxi with local officials. If he

didn’t, he would not be granted export licence, would not get a bank loan, and would

not even have the electricity and water supply to run the factory. Clearly in this case,

the firm was forced to maintain its guanxi; thus the guanxi became a powerful tool

wielded by corrupt officials to blackmail business for their personal gains. Despite the

persistent campaign by the government, corruption has continued unabated in China

because the political-economic systems and guanxi culture – the very soil in which

corruption flourishes – have remained unchanged.

GUANXI’S CONSEQUENCES

Studies on guanxi has so far been mainly at the personal level, i.e. those who are the

members of a guanxi network, though some discussions also relate to the

organisations these individuals represent. This is inadequate. As a guanxi transaction

influences a far wider public than the guanxi parties concerned, the consequences of

guanxi must be examined in the context of all stakeholders and at three levels:

personal, organisational and societal. Firstly, guanxi, by its very nature, discriminates

against people outside the guanxi network. This is against the Principle of Fairness.

People have the right to be treated fairly, impartially and equitably. If a person

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(outsider) is treated unfairly because of the special treatment granted by a guanxi deal,

the ethics of such guanxi deal is called into question. Secondly, guanxi is all about

exchanging favours, especially about obtaining ‘special treatment’ from those who are

in power. In this case, guanxi is inherently corruptive as such a special treatment may

be just legal, but is very much questionable in moral and ethics terms. ‘Special’ means

to bend or break rules, to act against one’s moral consciousness or act illegally.

Individuals and organisations that stick to ethic standard will suffer as the result of

unscrupulous guanxi practice. Where some individuals gain via guanxi, the society in

general loses. In short such a guanxi transaction does harm to the social goods.

Moreover, business guanxi violates the so-called ‘arm’s length principle’ which states

no personal or family relationship should play any role in economic decision-making

(Tanzi, 1994). All the benefits that guanxi is alleged to have in the literature can be

summarised into two categories: acquiring rare resources and obtaining protections.

Firstly, guanxi gives its members the opportunity to acquire rare resources which are

otherwise unobtainable or too expensive. To name some obvious examples:

business /import /export license, land, property, shares, personnel, key supplies, cheap bank loans or foreign exchange, inside /confidential information, secure a market or distribution channel, official endorsement for a poor product, etc.

In an open market economy, no individual or firm should be allowed to have such a

privilege as the advantages enjoyed by guanxi members bring competitive

disadvantages to other firms and amount to unfair competition. Eventually not only

those firms suffer but consumers and the society in all will have to pay the price.

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The second benefit is protecting guanxi members when they face threats and troubles,

for example, pollution fines, taxes increase, consumer compensation, court disputes,

bankruptcy, etc. Such protection offers guanxi members immunity from the law.

Guanxi-related corruption, no matter if it is grand or petty, is in fact to bribe the

bureaucrat where the interest of general public is victimised. In a democratic society

no one should be allowed to be above the law. Those who break the law should be

punished in order to protect the public interest. Ethically speaking, there is good

guanxi and bad guanxi. The consequences of guanxi can range from benign, neutral,

to questionable and corruptive. While family and helper guanxi are generally good or

neutral, business guanxi at best has misgivings and at worst is corruptive. Although

there are unlikely to be any simple rules that can be used to judge what guanxi is

ethically acceptable and what is not, a rule of thumb is that a guanxi practice is ethical

only if it causes no harm to a third party or to the society.

Corruption exists in every economic system but guanxi-related corruption has unique

Chinese characteristics. The weakness in the market structure and an inadequate legal

system, combined with a lack of transparency due to the absence of political

opposition and media scrutiny, has allowed guanxi to contribute greatly in making

China top of the league table of the most corrupted countries. Corruption is not only

present in isolating cases but also institutional and structural, from the top elite

bureaucrats to bottom, involving almost every part and level of the society. Some

people ruthlessly use guanxi in their pursuit of personal gains, causing egregious or

invisible long-term permanent damage to the society. China has passed hundreds of

laws and legislations each year, but the problem lies in the interpretation and

enforcement. In a society with the tradition of rule of man and the party above the

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law, it is not uncommon that the standard of stringency and enforcement vary from

case to case. Each year 70 percent of economic cases remain unsettled after the court

verdict (China Youth News, Aug. 2000). In some cases, the judicial system itself is

also plagued by guanxi and corruption.

CONCLUSION

It is rather strange to see that something detested and condemned in China has found

its popularity in the western business literature. While China is attempting to move

away from the guanxi-based system to a rule-based system (the Economist, 8/4/2000),

advocates of guanxi in the west appeared to have found a new business model with a

utopian enthusiasm (Amber, 1994; Lovett, et al, 1999, etc.). If China wants to

modernise herself and join the global economic system, it has to abandon unethical

guanxi practices. In fact the need of relying upon guanxi in doing business in China is

no longer as compelling as in the past. As discussed above, business guanxi is a

product of China’s political and socio-economic environment: imperfect legal system,

transient market structure and underdeveloped infrastructure as well as traditional

cultural values. Under the shortage economy of the 70s and early 80s, one had to use

guanxi to buy a bicycle or train ticket, but there is no need to do so today. The

development of the market in the last 20 years has made all these uses of guanxi

redundant. It can be argued that with further progress in the market economy and the

emerging democratic civil society, the importance of business guanxi (in its current

form), will be gradually reduced rather than increased.

For international companies doing business in China, guanxi may still have a role to

play, particularly at the initial entry stage: introduction, negotiation and set-up of

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operation. As soon as the business is up and running, other factors will take over the

importance of guanxi even though the relationship established at the early stage needs

to be re-assessed to decide whether to maintain it over time. This is because the

guanxi stock and the role it plays will be diminished or changed while foreign firms

move down the learning curve in the Chinese market. This is supported by the

author’s recent survey of 28 international joint ventures in Eastern China.

Respondents named branding, quality and distribution channels rather than guanxi as

the most important factors in achieving marketing goals. Ultimately it is not guanxi,

but superior marketing strategy and better customer values that make a business

successful in the Chinese market, just as it is true anywhere else.

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REFERENCES

Alston, J.: 1989, ‘Wa, Guanxi, and Inwa: managerial principles in Japan, China, and Korea’, Business Horizon, March, 26-31. Ambler, T.: 1994, ‘Marketing’s third paradigm: guanxi’, Business Strategy Review, 5:4, 69-80 Ambramson, N. R. and Ai, J. X.: 1999, ‘Canadian companies doing business in China: key success factors’, Management International Review, 39:17-27. Arias, J. T. G.: 1998, ‘A relationship marketing approach to guanxi’, European Journal of Marketing, 32:1/2, Bian, Y.: 1994, ‘Guanxi and the allocation of urban jobs in China’, The China Quarterly, 140, 971-999. Brunner, J. A. et al (1989). The role of guanxi in negotiations in the Pacific Basin. Journal of Global Marketing, 3:2, 7-23. Buttery, E. A. and Leung, T. K. P. (1998). The difference between Chinese and Western negotiations. European Journal of Marketing, 32:3/4. Chen, M.: Asian Management Systems, Routledge, London. Davies, H. et al: 1995, ‘The benefits of ‘guanxi’-the value of relationships in developing the Chinese market’, Industrial Marketing Management, 24, 207-214. Fock, K. Y. and Woo, K.: 1998, ‘The China market: strategic implications of guanxi’, Business Strategy Review, 7:4, 33-44. Hwang, K.: 1987, ‘Face and favour: the Chinese power game’, American Journal of Sociology, 944—974. ICAC: 1993, Hong Kong investors rely on guanxi to do business in China, Oriental Daily News, 25 July. Jakobson, L.: 1999, A Million Truths: A Decade in China. M. Evans and Co. N.Y. Lovett, S. Simmons, L. C. and Kali, R.: 1999, ‘Guanxi versus the market: ethics and efficiency’, Journal of International Business Studies, Summer, 30:2, 231 Luo, Y. (1997). Guanxi and performance of foreign-invested enterprises in China: an empirical inquiry. Management International Review, 37:1, 51-71. McDonald, W. J.: 1998, ‘the ban in China: how direct marketing is affected’, Direct Marketing, 61:2, 16-19. Osland, G. E.: 1990, ‘Doing business in China: a framework for cross-cultural understanding’, Marketing Intelligence and Planning, 8:4, Simmons, L. C. and Munch, J. M.: 1996, ‘Is relationship marketing culturally bound: a look at guanxi in China’, Advances in Consumer Research, 23, 92-96. Standifird, S. S. and Marshall, R. S. (2000) The transaction cost advantage of guanxi- based business practice. Journal of World Business, 35:1, 21-42. Tanzi, Vito: 1994, ‘Corruption, governmental activities, and markets’, IMF Working Paper. Transparency International, www.transparency.org/ Tsang, W. K.: 1998, ‘Can guanxi be a source of sustained competitive advantages for doing business in China’, The Academy of Management Executive, 12:2, 64-73. Vogel, D.: 1992, ‘The globalisation of business ethics: why America remains distinctive’, California Management Review, 35:1, 30-49. Yau, O. H. M. et al.: 2000, ‘Relationship marketing the Chinese way’, Business Horizons, January. Yeung, I. Y. M. and Tung, R. L.: 1996, ‘Achieving business success in Confucian societies: the importance of guanxi’, Organisational Dynamics, 25:2 54-65.

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Table 1 A Comparison of Three Types of Guanxi Guanxi Type Family Guanxi Helper Guanxi

Business Guanxi

Definition Special relationship, the expressive tie

Process of exchange favours

Process of finding business solutions through personal connections

Nature Emotional, and Instrumental

Instrumental / Utilitarian

Purely utilitarian

Cultural/ Social Root

Chinese cultural values

Cultural values and contemporary socio- economic factors

Current political /economic structures, eg. weak legal system

Base Mostly blood base, some social base

Social base

Social base, or through intermediary

Core Values Qinqing / affection, obligations, empathy

Renqing, face, trust? Credibility

Renqing, face, power/ Influence

Motivation / Purpose

Mutually dependent, emotion-driven

‘To get things done’ utility-driven

To overcome bureaucratic obstacles, to get special treatment /protection

Function Ends and means Means

Means

Exchange Love / affection, Support

Favour ‘Money and power deal’

Condition Reciprocal not necessary, can be altruistic

Reciprocal expected, but the weaker party benefits more

Strictly reciprocal, ‘gain and loss’ bargaining

Relation ‘Own people/ zijiaren’, member of a big family

‘Shouren- familiar person’, outsider (but not stranger)

Outsider, a mixture of private and business relations

Quality / Closeness

Strong and stable Medium, normally unstable

Varies (depends on the existence of other bases

Downside

Nepotism Burden of renqing - ‘human debts’

Corruption, social loss

Time Long term or Permanent

Temporary, one-off Temporary

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