Background information
The new economic advancement in the world has forced China to change some of its communist concepts in order to suit modern development. This began with disintegration of the Soviet Union in 1991 and since then, the Chinese government has strategically sort to amend some of the communist ideologies in order to ensure both economic and political progress in the country. The massive tides of the economic globalization in the world have also created a massive policy change in china. Indeed, the Chinese economy has also been heavily boosted by the integration move adopted by the government.
Its subsequent inclusion to the world trade organization (WTO) in 2000 has also greatly improved China’s economic performances with the rest of the world. Moreover, proper coordination and association with other international communities has assisted China to improve its reputation in the world. This has also encouraged economic interdependencies between countries as they seek to trade and interact with each other. Generally, the world trade organization and the general agreement on tariff and trade have modeled the Chinese policy to match with other international policies and standards. The organization’s resolutions have propelled China to remove the trade barriers and restrictions which were earlier established by the communist regime. Indeed, the huge population contained in the Chinese market enhances it economically as it efficiently offers ready market for domestically produced goods.
The China’s membership to WTO has therefore enhanced economic stability. This is mainly because through integration China has been able to transact with the rest of the world. Moreover, integration has enabled the Chinese economy to receive enormous support from other international communities. Moreover, the Chinese integration with other economies has relieved foreigners from the investment fears, as well as enhancing free flow of capital and technology between China and other international communities.
The economic integration of the Chinese economy with the rest of the world has tightly glued and empowered the country to grow and expand significantly in the resent periods. It has efficiently enabled the Chinese government to solve trade and other investment disputes in a more diplomatic way. China has also received an exponential growth in the resent times as majority of the foreign investors have opted to venture its market. This has been mainly occasioned by the high population density in the Chinese market as many counties view Chinese market as a market full of potential and they have proceeded further to invest huge sum of money into it. The Chinese government has also diversified its investment portfolios by seeking investments contract from the third world countries, and more so, in Africa. The fare contract price that the Chinese government has been providing to the developing and the third world countries has enabled it to become one of the leading business partners in the world. It’s cheap and quality electronic materials have also dominated the global market thus boosting the domestic production. China has also established a close relationship with the Americans, a move which has greatly enabled the Chinese to acquire skills and competency in the production field (Lardy, 2002, p. 105).
The Chinese move towards building intellectual property rights as advocated by WTO has engineered the technological growth in its economy. This has also lessened the duplication of investment problem amongst investors. The move therefore encourages new ideas and innovations which place China on the receiving/benefits end.
Concept definitions
Guanxi is a Chinese culture which is very powerful, dynamic and influential in business and social world. The term entails close macro or micro-economic relationship between two or more different parties. Moreover, the relationship is said to be reciprocal, meaning that, both parties actively participate and benefit from it. In most cases, there is exchange of social favors between the involved parties. As the Chinese born in China but educated in England put it, Guanxi assist people to live happier and more improved lives. The relationship concept therefore facilitates effective communication between businessmen. It is through it that the Chinese businessman who intends to engage car importation business in German is oriented into such business. But for Guanxi relation to be effective the two parties should establish personal connection first.
The guanxiology is a cross-disciplinary research field that seeks to analyze some of the key features of the guanxi connections. Among the major qualities of guaxiology is that it has a multi-dimensional capacity. This is mostly shown by the field’s macro status character as it relates to the managerial, marketing, organizational or human resource fields. The behavior also includes the individual relationship which seeks to solve issues such as the interpersonal, social and family connection problems. That’s why a Chinese transacting in Europe, Middle East and South America likes the concept as it enables people to overcome stumbling blocks in life and businesses. The concept is however very practical in China but it raises some issues when implemented in other parts of the world. But different people have also engaged themselves in Guanxi by throwing parties which are aimed at connecting the opponent to key people who can assist them in transacting businesses.
Additionally, it has psychological and political background, as power and authority of parties and individuals establishing guanxi are vital to the participants. All this is mostly done since the parties involved seek to benefit from the whole process (Luo, 2007, p. 6). As the Italian working in a Chinese firm put it, the relationship is aimed at helping each other out when faced with difficulties. Through the relationship, the person was able to renew his passport without having to undergo the lengthy procedures. The case of the Chinese living in America and doing business with China shows how he connects well with Chinese business associates due to his father’s influence; the parties involved therefore engage in reciprocal deals. The reciprocal idea can be captured by observing how the American (interviewed) gained connection with the Chinese key personalities after assisting a nephew back in the US. The guanxi concept has some economic roots as it involves provision of direct or indirect incentive, which seeks to improve the economic status of the parties involved.
Guanxiology is also highly integrative as it establishes links between people with related and diverse fields. The basic idea of the relationship is to establish a strong understanding among people, while the overall process is extremely dynamic as it keeps on changing as the world changes. This quality has therefore enhanced unity amongst the Chinese people living in different walks of the world. The concept has also expanded to include Chinese and other foreigners.
The overall guanxi relationship can be established locally by the Chinese living in China. In this case, the tie is strongly held as the members share location and communicate in the same language. Basically, it is often institutionalized into mutual association between the local people. People also establish a fictive kinship relationship which is mainly observed in the Chinese counterparts who shares surnames. This type of relationship is mostly instigated and propagated by the Chinese kinsmen and clan leaders. The relationship is also established due to blood or a marriage connection between the parties involved, and mainly occurs if one of the family members occupies an influential position which he can use to boost other family members.
There is also an intra- organizational tie between people who share and controls a common investment entity. Additionally, a relationship can be established in people in a workplace. Such connections encourage integration between people from different localities and upbringing, and the idea behind this is usually to develop and nurture trust and faith between business partners. Other relationships are established from the trade associations and other social meetings such as the social clubs where people interact while either cerebrating or participate in social activities such as sports and dinners.
Finally, people can establish relationships through friendship. In this case, people integrate with fellow colleagues when necessary. This form of relationships is however more beneficial as it establishes a competent guanxi; it connects professionals and competent individuals from diverse fields. The four interviews have dwelt much on friendship connections which have been done by organizing winning and dinning parties as a way of initiating or reciprocating Guanxi between them. Due to the selective nature of this form of relationship, there is an element of credibility and reliability on the relationship established.
The ganqing is an important social concept in the Chinese culture; to them, it establishes a good rapport between people. The concept involves a feeling of understanding and cooperation between people; however, practiced in china alongside guanxi and the Confucian relationships.
The Chinese community also believes in the Confucian legacy which identifies man as a social being. The legacy seeks to stabilize the individual relationships and thus creating some social order. The Confucian legacy is also widely exercised in china and has close similarities with the guanxi concept. Both of them encourage close ties between people. It is good to understand that the Chinese relationships can be differentiated through social network parties. Among the major Confucian relationship widely recognized in China include the Wul-lun cultural system, a highly formalized Chinese cultural system which seeks to unite and glue people together. For instance, it encouraged the father-son relationship, close ties between parent and the sibling and the older brother-young brother relationship which mainly occurs between two brothers in a family (Luo, 2007, p. 7). There was also a marital relationship which existed between the husband and wife. The final traditional relationship emphasized in the Confucian legacy is the friend-friend relationship.
A thorough analysis of the legacy indicates that the overall concept is almost similar to the guanxi concept where relationship levels exist between different parties. The only significant difference between the two ideological concepts is that the Confucian legacy has a paternalistic order which guides people’s relationships. The Confucian trend which is mostly exercised by the Chinese residents is however greatly contrasted by the western cultures. The western cultures advocates for independence and self containment within the social circles. According to the western cultures, relationships are mainly viewed as ends in themselves instead of being means to the ends. However, the Confucian legacy has a positive perception on relationships as it acts as means towards realizing different groups and individual objectives. The Confucian relationship can also be comprised of yang social culture which majors in the family member, familiar persons and strange people relationship. The chia-ren social culture on the other hand is more stable and permanent compared to other types of relationships within the Chinese people (Luo, 2007, p. 8).
What goes unspoken in the Chinese business practice?
Guanxi plays a very big role in the society of China. It serves as a symbol of trust and integrity building in a system without strong background institutions. It may as well make a component of a network that is informal, enabling people to avoid inefficiencies inbuilt in a communist bureaucracy. There is also a regard of guanxi among the people of being a bond that holds them together in the Chinese society.
In the case of the organizations, guanxi plays a strategic role since it unites the organizational operations with the government. Such moves enable the organization to operate smoothly and efficiently without many political hindrances. According to Dunfee & Warren (2002, p.192), the business publications that came out in the recent times show appreciation to the multinational companies who make use of guanxi in a most skilful way as they gain entry in the Chinese market.
Dunfee & Warren (2002, p.192) put it that the research that was carried out in the resent past give an indication that the business organizations that are privately owned utilize guanxi in place of the formal institutional support. It was established that much value was attached by business organizations on the business links and depended, to a great extent, on guanxi for protection and provided much more gifts that were unreciprocated than the executives in business organizations that were owned by the state or the collective hybrid organizations. This implies that guanxi may be utilized in place of the direct contacts with the government and the party personnel that may be there in other forms of organization.
Coming to the individual level, the managers of the business organizations may set up guanxi and utilize it in carrying out business in several ways. It can be utilized to get new customers, maintain the existing customers, carry out day to day business operations and also, to a particular point, it can be used to evade government’s procedures and investigations. For instance, a person in the management position may make friends with a government official in order to avoid the lengthy approval process on a particular product; from this friendship, the manger is able to avoid the government bureaucracies and present the product to the market without much delay.
The Chinese government has considerably established a cordial relationship with the less developed and the developing countries as far as the road and other infrastructural facilities are concerned. This has enabled the Chinese economy to expand into these nations as a mutual coexistence is established between the parties. There is however some guanxi concept that is revolved in these contracts. The Chinese government has greatly lowered most of its contractual costs thus encouraging more of these countries to establish the close relationships. There is also some mutual coexistence between the parties involved as the developing and the less developed nations obtain quality products and services from china.
The economic sustainability of guanxi concept among the Chinese communities is guaranteed as the trend is passed from one generation to the other. Basing the concept on the resource based theory; parties will consistently acquire favorable deals from their colleagues, both in china and other foreign countries. The sustainability of the concept is however greatly threatened by the western social cultures (Tsang, 1998, p. 64).
The guanxi culture is deeply entrenched in the Chinese society thus becoming a routine based activity amongst people. Guanxi culture has however developed among the Chinese people living in china and also in the Diaspora. It is said that one has a guanxi to another if he or she extends a favor or acts on another’s behalf depending on the circumstances. The acceptance of such favors implies that the party concerned has fully agreed to reciprocate the same when need arises (Chen, C, Chen & Xin, 2004, p. 200). Guanxi can also be considered as the money saved to be spent by the two parties. This is because the resource can be fully exhausted if the parties are not cautious of their moves in the interactions process. The Chinese people therefore introduce and connect with one another thus strengthening their economic and social backgrounds. This move assists the new business partners to establish firm link with the old and competent partners who have been into business for quite a considerable time.
It is eminent that the reciprocal nature of the guanxi culture makes the Chinese people to deeply engage and relate to people whom even they don’t know at all with ease. Although the concept is aimed at benefiting people with the Chinese origin, negative implication can be extended to either of the party if he or she establishes guanxi with a wrong or unworthy party. For instance, the guanxi relations have extended corruption in the mainland China notably Hong Kong. This is because the Chinese people are willing to bribe or advance gifts and payments to their opponents in order to establish guanxi with them. According to the report issued by the Hong Kong independent commission against corruption, an average five percent operational cost end up being used to extract favors from people in China (Su & Littlefield, 2004, p. 119).
The Chinese people are however quick to distinguish between corruption and guanxi since they have been socialized in it and understand it better. The westerners investing in the Chinese market have incorrectly identified guanxi and as a result they have translated an ethical and morally upright behavior to corrupt deals such as gifts and bribery. It is due to this factor that the Hong Kong commission has been established to mitigate the rising corrupt behavior in the country.
Difference between Guanxi and Bribery
Giving out of gifts may be regarded as either bribery or guanxi cultivation. This is dependent on the objective behind the action of the person offering the gift. For instance, if a government official accepts a particular amount of money from a certain person requiring some help from him or her, this is a bribe. If a person gives out a birthday gift to another, this is a way of building up a relationship. If a person takes out another for tea on which he or she spends money, this can not be regarded as bribery.
Making the preexisting social relationships stronger is a strategy that is very much more reliable than offering bribes to officials that are not connected in any way. There can be consideration of the act of exchanging gifts as being an issue of bribery rather than an issue of relationship development. But such relationships are usually one-time deals. In a situation where exchange of gifts is not for the reason of bringing about ganqing but instead to acquire some particular immediate goal for which this relationship will be of use, then in such a case, the move can either be termed as bribe or even a clean fair deal.
A person may be depending on another whom she or he may be having strong social relationships. This may cause the person to seek advice from such individuals. In regard to this, gift-giving can’t be evaded. Such an approach is most effective in building up guanxi that is sustainable than exchanges that are not deep at all.
From the four interviews performed on different persons living in different environments, Guanxi is an ethical and legal relationship. This is because the concept is usually done with a clear objective of establishing a mutual relationship between people. The fact that Guanxi is not a once-strike deal but a continuous operation differentiates it from bribery which is established to meet a specific demand.
To draw the difference between acceptable gifts and bribes, the government of China focuses on the aim behind the exchange. This government carries out a consideration about whether the provider is utilizing the powers delegated upon him or her by the government in the exchange or not. The government also considers whether the fee-for-service action is allowed legally or not and also the exchange effect to the general public (Luo, 2007, p. 30).
Basing on the interviews carried out on the questionnaires, the practice of guanxi can be distinguished from bribery. In the China context, this practice is a legal practice and is accepted by everyone. However, if this practice is carried out anywhere else outside china, some aspects of it might be deemed to be unethical and can turn out to be an illegal practice. For instance, those people who may engage in gift giving in order to secure a contract are doing something in secret.
Equivalent of Guanxi in America
According to Tsang (1998, p. 64), there is no exact equivalent of guanxi in America which entails the connection between people with mutual relationships. In general terms, the American people evade those links or relationships where there is mutual dependence, unless in the family relationships. Indeed, they do not regard such relationships as being vital in their day to day life.
The Chinese born and raised in America establishes that Guanxi can be related to the notion of networking in America. Networking carries more limited obligations as compared to guanxi. This notion involves getting familiar with people who are able to provide information and probably also give help in those areas that are associated with one acquiring employment or getting a promotion in employment and to undertake those responsibilities that are related to employment. People in the same network might either offer their assistance or they might not. Moreover, there are no many expectations of these people in the same network offering help in broader range of the life aspects. Eventually, there are expectations that people should take care of themselves.
According to Luo (2007, p. 50), networking between organizations is crucial in the success of business organizations. The literature of management in the American context has carried out the analysis of the management networks at an increasing level as being a significant feature of strategic contact. Networking is regarded as a way of understanding the overall connections among business organizations that take part in the production and distribution of goods and services.
Networking can play a major role in bridging the gap that might be there between the people who are engaging in business and come from different nations as well as cultures; this therefore enhances effective trade. The American operating businesses in china also relates Guanxi with networking. Basically, both networking and guanxi put much emphasis on the idea that networks are not separate occurrences in regard to self-liquidating deals but they are relationships that are continuous. Here, being continuous implies that the activities that are carried out by the parties which are concerned in a relationship can’t be finalized without the parties having reciprocated the act.
However, it is important to note that the exchange of favors that occurs among the guanxi network members are not purely business-oriented but also involve social exchange. As opposed to the American networking, guanxi is social capital. For the reason of these differences, many American people who engage in business exaggerate guanxi relationship constituents of giving gifts and wining-and-dining to bribery or perceiving this as just being wine and meeting friends. In the Chinese context, guanxi is an investment one puts in a relationship and it is not just a fee-for-service; it plays a role in making relationships stronger.
The American similarly has a culture which encourages people to extend references to their associate people. This culture mainly revolves around business world as key people seek to obtain favors to those holding some key position in the government or other beneficial fields. The American culture is nevertheless fully developed just as the Chinese guanxi culture as the referencing style entails a formal relationship between people. In this case, a party will provide reference to another party incase of application of financial assistance from the financial institution or even in a learning institution. By accepting to be someone’s referee, the party will be accountable incase one of the contracting parties fails to honor the contract terms and conditions.
Conclusion
Interdependency between people should be encouraged since it offers a harmonious coexistence between them. The relationship allows people to connect and network in business and other social settings. As a result, there is a mutual gain to the relating parties. The Chinese community, with its guanxi concept, has therefore fully exploited the social nature of a human being by encouraging the concept among its members. Basically, guanxi is a Chinese culture which is very powerful, dynamic and influential in business and social world. The term entails close macro or micro-economic relationship between the two or more different parties. The parties involved also express obligations toward each other. The relationship is also said to be reciprocal meaning that both parties actively participate in the whole process. In most cases, there is exchange of social favors between the parties involved. This interpersonal relationship is not strange to the Chinese people as it is common in the Chinese community. The culture however remains secretive since none of the party members gets to know the exact reciprocal move and favor that the other opponent will extend in return of a favor done to him or her. However, if this practice is carried out anywhere else outside china, some aspects of it might be deemed to be unethical and it can turn out to be an illegal practice. For instance, those people who may engage in gift giving in order to secure a contract may be deemed to be doing something in secret. However, the Chinese government has laid proper infrastructure which distinguishes Guanxi from bribery. In the China context, Guanxi is a legally accepted practice which is common and acceptable to all. Indeed, Chinese government has considerably established a cordial relationship with the less developed and the developing countries as far as the road and other infrastructural facilities are concerned, leading to mutual coexistence. There is however some guanxi concept that revolves between the contracting parties. The Chinese government has greatly lowered most of its contractual costs, thus encouraging more of these countries to establish the close relationships. Other countries should therefore emulate the Chinese community since a genuine interdependence between people can greatly boost their economic, social and political status.
References
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Su, Chenting and Littlefield, E. James. “Entering Guanxi: A Business Ethical Dilemma in Mainland China?” Journal of Business Ethics, Vol. 33, No. 3 pp. 199-210. Springer. 2001. Web.
Tsang, Eric. “Can guanxi be a Source of Sustained Competitive Advantage for Doing Business in China?” The Academy of Management Executive (1993), Vol. 12, No. 2 pp. 64-73. Academy of Management. 1998. Web.