Nine years ago when practicing law in Guangzhou, one of my friends (Taiwanese and American citizen) was helping American businesses in Guangzhou. One of her approaches was to educate Americas about the importance of “Guanxi” in Chinese business environment. After I came to the U.S., many times I have heard people reference “Guanxi” as a way to do business in China.
Most Westerners associate “Guanxi” with “kickbacks”, “pay for play”, “under the table”, “tribute”, etc. My overall feeling is that people think “Guanxi” is a must or essential to be successful in China. The concept of “Guanxi” and its historical context in Chinese culture, has to be examined so there is no misunderstanding of the meaning of “Guanxi” in reality..
China has a more than 5000-year history. Confucianism has been continuously influencing Chinese culture during the past 2,000 years, no matter how economic development has changed people’s life, then and now. Confucian teaching is an essential part of Chinese heritage, and plays key role in social order. “Guanxi” is part of that heritage.
Traditionally, family is a basic unit for the society and social order. Each family grows to a larger family, naturally through the family tree; and a small family becomes part of larger social network through your family roots. More widely, “Guanxi” stretches from family relationship, then relatives, classmates, colleagues, friends and more. In the past, a family link was very important in maintain social order. Family members could be jointly liability if a related family (member) was guilty of a certain crime. In feudal time, some crimes could be“株连九族”- a concept that the blood family member was jointly liable in crime scheme. This concept explains the selfish departmentalism of feudal clan (家族本位主义) and the importance of the family unit in society and maintaining social order.
Because of this Confucianism tradition and history, Chinese people like to build up a “Guanxi” to do any business. “Guanxi” is a Chinese word for “network”. But Chinese people like to get connected through the closest tie around their family member, relative, classmate, friend circles and more… In older days, “Guanxi” was very important in consideration of where China was from, in history, culture and philosophy.
But don’t be wrong. Sometimes “Guanxi” has more negative meaning than positive one. For example, “walk a Guanxi” is to describe a concept that someone is to use his network to get personal benefit, under-table deals, corruptions or get unfair competition. A simple phenomenon that you could feel from current news of Chinese political and economic scandals is that when a big “fish” was caught for corruption, there were always many fishes involved because there were so many fished on “Guanxi Chain”. Negative part of “Guanxi” had been always a problem in the past.
During the normal course of business, wisely using “Guanxi” to do business shows respect for Chinese tradition and culture, because people like to get connected to explore more business
So, “Guanxi” is a double sided sword. Use it wisely, otherwise there would be trouble. You can read this article GlaxoSmithKline Found Guilty of Bribery in China to know the story what happened in GlaxoSmithKline’s bribery case in 2014. As a matter of facts, “Guanxi” is everywhere in this world, and bad thing does not just happen in China. You might refer the US financial services companies hiring of persons to obtain access and favors, and the resultant fines imposed in the US.
Today, thanks for Chinese judicial reform, improvement of governmental transparency and performance driven economy, “Guanxi” has become of lesser important that factual patterns of behavior. China now has been applying more and more “rule of law” to run the government. Chinese business also has realized and recognized that the quality, good service, pricing and creativity are essential to success; the negative edge of the sword of “Guanxi” has become less important in business operations.
Be aware that the use of “Guanxi” may be different from city to city and province to province. The expression of “Guanxi” may be expressed differently from before, for example, people are more likely to say “social network” than “Guanxi” in urban areas in China, which express the positive way of business practice.