Sociology: Is Guanxi Corruption?

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Table of Contents

Introduction
Guanxi and its application
Guanxi is a subset of the Chinese culture
Analyzing Guanxi; is it Corruption?
Conclusion
References

Introduction

Culture is an important aspect of life and usually develops because a certain need exists. In developing countries, most aspects of life are governed by a specific culture that aims to help where poor government policies and inadequate infrastructure have failed. In China, Guanxi has been in use for a very long time and has been socially accepted as a way of life, both in the day-to-day activities and also in business practices. The concept of Guanxi has been applied in many cultures, especially in developing countries. In Russia, it is referred to as Blat; the Middle Eastern Culture has a similar concept named Wasta, while the Cubans have socialism.

While most people in developing countries have derived many advantages from Guanxi relationships, the morality of Guanxi has been questioned. While the Chinese community views Guanxi as an important part of their life, most foreigners trying to infiltrate this society view Guanxi as a form of corruption.

Guanxi and its application

The term Guanxi has been described as the process of setting up interpersonal connections with the aim of acquiring favors. Luo (2000) states that Guanxi encompasses “interpersonal linkages” that are meant to ensure the continuous exchange of favors. The main idea revolving around this concept involves the creation of relationships among different groups of people with the aim of forming certain obligations amongst themselves that ensures a continuous exchange of favors.

According to Tsang (1998) Guanxi starts from a base either through blood relationships or connections formed by social interactions. Social connections arise by having the same background, i.e., shared the same school, resided in the same neighborhood, or worked in the same company.

Although having a base is of importance, strong Guanxi needs interactions, favor exchange, trust, and time together. In order to develop a system of Guanxi that is strong, participants usually interact with each other’s family, hold entertainment parties, exchange gifts, and support each other’s friends or family (Dunfee & Warren, 2001). As such, Guanxi has, through time, infiltrated many aspects of the lives of the people in the relationships.

It can be traced to social, business, and political activities. In social life, Guanxi offers a means through which families can help each other face day-to-day obstacles in life. Guanxi can be used to aid members in getting employment by using connections from those already employed. Guanxi can also be applied in other ways, such as securing medical treatment that may be at times too expensive for one person, obtaining information, and acquiring goods that may otherwise be too difficult to get (common in communistic societies).

At the business level, Guanxi has been extensively applied in China, resulting in mixed feelings about its use. Guanxi was integrated into business activities in China due to the poor political and economic environment that existed at the time. China, for a long time, was characterized by weak government policies and poor infrastructure that could not effectively support business practices. Due to this, Guanxi was extensively used by businessmen to solve the existing difficulties and has been in use until now.

First, Guanxi in business activities acts as a means of ensuring trust in a system composed of unstable institutions (Luo, 2000). Due to the inadequate rule of law, unscrupulous businesses had a chance to develop, but through Guanxi, which insists on trust as a basis of relationships, the development of these businesses could be curbed. The inadequacy of communistic practices in the country also necessitated the use of Guanxi, where groups of people interact and form a system that could effectively overcome these inadequacies (Xin & Pearce, 1996).

Guanxi can also be used as a strategic tool, especially by private companies without ties to the government (Walls, 1990). Guanxi may offer a certain business options that may otherwise be unavailable, e.g., If a business needs a quick loan, using Guanxi networks could bypass bureaucratic loaning procedures required by banks. Guanxi can be used to acquire favors that can be difficult to get without the help of the government. In certain situations, it may be difficult to enter a particular business field without strong government ties, but through the use of Guanxi, one can maneuver easily into almost any field in the Chinese market (Tsui & Jiing-Li, 1997). By utilizing Guanxi, those already in the field maneuver the newcomer into the business by offering advice and connecting the businessman to suppliers, manufacturers, and middlemen.

Guanxi is also used as a means of creating and maintaining business contacts with politicians and other state personnel (Kwong, 1997). When setting up a Guanxi network, it is always common for the members to integrate a person of authority. This thus ensures that whenever a certain situation requiring government intervention arises, the network can easily manage. Through the use of Guanxi, one can receive favors from the government by using contacts within the governments belonging to the same Guanxi system. Private companies use Guanxi to get contract jobs from the governments that would be otherwise difficult to acquire (Xiucheng & Ambler).

Guanxi is also used to ensure that the business keeps its customers, acquire new customers, and to facilitate normal day-to-day business activities (Tsang, 1998). Through the various interconnections formed a business can be able to acquire and keep new customers. Managers can also use these interconnection to iron out obstacles that may hinder business operations, e.g., using the system to ensure new products are approved faster by the government or the entire approval process can be sidestepped by using connections in the government (Kaltenheuser, 1998).

Finally, Guanxi is usually applied as a screening tool through which organizations select and choose candidates with strong interconnections (business and personal) hence able to expand the Guanxi system of the business (Yeung & Rosalie, 1996). In this respect, Guanxi can also be used to find and acquire jobs by relying on the various personal connections on has.

Guanxi is a subset of the Chinese culture

In order to understand the concept of Guanxi, it is important to look at Chinese culture. The Chinese view relationships as the basis of life. Each action one does in relation to others. The Chinese culture, drawing from Confucius, considers a person of virtue (Jen) to be one whose actions are motivated by duty to others and who can restrain his own desires for personal gains (Bell, 2000). Each and every individual in the Chinese society has been taught since childhood on the importance of setting up relationships founded on responsibility and respect and treating others in such a way as to not use them for personal gains.

Chinese society also tends to set up different groups where people are categorized. People with a common interest, background, or goals tend to stick together, and the categories so formed are usually bonded very strongly (Donaldson. 1996). The Chinese also have trust issues with strangers. In order to penetrate a new area, one needs someone who is familiar with the people in that society. Once one is accepted in a given community, the need for future interactions creates the necessary foundation to foster trust.

The final aspect of the Chinese culture to note is that everyone is expressed in terms of their responsibility in the mutually connected social roles forming part of the hierarchical social order (fen). The Chinese believe everything has its place, and thus all things in nature belong to a specific fixed social status.

Analyzing Guanxi; is it Corruption?

The term corruption has very many definitions and has been generally described by Banfield (1975, 587) as an act that occurs when a person in power is compelled to take actions that favor another, due to the provision of gifts usually to the detriment of public interests. Yadong Luo (2000, 196) has described corruption as individual behavior contradictory to existing norms or that which violates rules that have been set out by a particular political framework with the aim of personal gains possible due to one’s position in society.

The first difference between Guanxi and corruption is that whereas Guanxi is heavily engrave in the social culture and norms of the people, corruption deviates from what is perceived as appropriate social behavior. Exchange of gifts in order to form strong interpersonal connections has been present in the Chinese culture for a long time, thus becoming a social norm. Corruption, on the other hand, deviates from standards that are communally acceptable. The public usually shuns those who are found to be corrupt but have no problem with those who develop Guanxi systems.

The second difference is that Guanxi involves a continuous flow of gift exchange, whereas corruption involves a one-time exchange of gifts. This thus implies that while Guanxi creates a system of mutual obligation between many parties ready to assist in any situation, corruption is only between the two parties with the term of payment and service required explicitly specified.

Thirdly, the Guanxi system is not against any laws of the country, and one does not face any legal action if the system fails. When dealing with corruption, however, one risks going to jail in case of failure e.g., when the deal between the parties is revealed to the public. In case one does not comply with the principles that define a Guanxi system, they lose that system and usually have to use higher amounts to enter or start a new Guanxi system. When a corruption deal breaks up, many risks arise, such as being arrested or even being killed to conceal the act.

Guanxi involves interactions formed over a very long period of time, some having survived many generations (Vanhonacker, 1997). Corruption, on the other hand, is a short term deal that ends as soon as a deal is complete and does not require any relationships between the parties only a need for personal gains. Parties engaging in corruption usually break their ties to ensure that they are not caught, but Guanxi relationships are usually highly nurtured.

The fourth difference is that while corruption heavily relies on the timeliness of the partners, Guanxi is not limited by time. There is no specified time period with which parties in a Guanxi system have to provide gifts, but when help is needed, one can usually receive it. Corruption, on the other hand, has an expiry date with which one person has to provide gifts to receive favors.

Another difference between the two is that Guanxi heavily relies on trust, but corruption is only driven by the potential gains. Parties engaging in corruption usually require immediate transactions where gifts and favors are exchanged simultaneously, and trust is usually not a necessity. The Guanxi system is founded on the principles of trust, honesty, and integrity; on the other hand, corruption is founded on the basis of power and personal gains. It is power that guides corrupt activities, and trust plays little or no part in the whole process.

The final difference between corruption and Guanxi is that Guanxi can be transferred from person to person and from one generation to another. Corruption is a onetime act that aims to benefit the participants in that particular time from that particular opportunity and thus cannot be transferred to other parties. For the corruption process to be successful, it requires the participation of very few parties, usually only two, but Guanxi is a system characterized by many interpersonal interactions and thus can be transferred from one person to another.

It is nonetheless evident that some areas of the Guanxi system border on corruption. The most notable similarity is that in both Guanxi and corruption, gifts are exchanged for favors. Guanxi sets up a system whereby continuous favors are granted through periodic gift-giving, which is essentially the main drive behind corruption.

Another reason why Guanxi may be viewed as corruption is that it may violate hypernorms. Hypernyms have been described as those principles so important and deep-seated that they consist of norms through which other existing norms are judged (Donaldson & Dunfee, 1999). They include those rules opposing murder, torture tyranny, and oppression. A basic hypernym is that of equality whereby, by virtue of being human, each and every person deserves equal and fair treatment.

The Guanxi system does not uphold this law and grants various privileges to its members who are not available to those people outside the system. People within a given Guanxi system can receive faster and better medical care, better jobs in companies within the network, resource unavailable to others, easy access to virtually any field of the China market, and can also receive endorsements for sub-standard products. The above privileges received by Guanxi members give them a competitive edge against other entities, thus amounting to unfair competition and treatment.

The last point to note is that Guanxi, as a practice, has the potential to undermine and destroy existing public institutions (Lovett et al.,1999). Due to the fact that people are granted favors according to their involvement with a particular Guanxi system, public institutions cannot then be fair and impartial. Institutions such as schools, law courts, hospitals, etc. may be affected by Guanxi relationships oppressing others so that members may benefit..

The differences noted above mainly deal with the definition of corruption in the legal sense and according to the social understanding of corruption. The differences also exist in how the two activities are carried out and propagated. Even though many differences are provided, certain similarities can be noted between Guanxi and corruption. To effectively analyze these factors, the history of China plays a very big role.

Guanxi came into use when poverty, poor government policies, poor infrastructure, and poor business systems existed (Vanhonacker, 1997). The system was formed to allow people to overcome these difficulties as a group. The Guanxi system has been effective as it is applied in virtually all areas of life, at the personal level and in business activities. Through time the practice has become a social norm, acceptable and recognized by all. It is for this reason that the system cannot be labeled as corruption since it has offered more good than bad and is also socially acceptable. The reasons are given as to why Guanxi is corruption can all be attributed to the negative use of the system and poor moral conduct that goes against the Chinese culture. It is true that Guanxi can form a very conducive environment for corruption, but the practice itself is not corruption; rather, it is a way for people to overcome common problems.

Conclusion

The application of Guanxi has yielded a lot of benefits to developing countries by providing benefits to members that would otherwise be difficult to acquire. Individuals can apply Guanxi relationships to better themselves while businesses can overcome difficulties arising from inadequate policies and the lack of infrastructures by utilizing Guanxi relationships. Although the system arising from these relationships can be a conducive environment for corrupt activities, such as using Guanxi to receive favor without regards to the community, oppressing those not in the Guanxi system and undermining public institutions, the concept of Guanxi is a product of Chinese culture which heavily relies on trustworthy and respectful relationships and as such Guanxi in itself cannot be termed as corruption.

References

Banfield, E. C., 1975. Corruption as a feature of Government Organization. Law Economics, 18, pp.587-605.

Bell, D., 2000. Guanxi: A Nesting of Groups. Current Anthropology, 41(1), pp. 133-138.

Donaldson, T., 1996. Values in Tension: Ethics away from Home. Havard Business Review, September-October, pp.48-62.

Donaldson, T. & Dunfee, T., 1999. Ties That Bind: A Social Contracts Approach to Business Ethics. Cambridge: Harvard Business School Press.

Dunfee, T. & Warren, Danielle E., 2001. Is Guanxi Ethical: A Normative Analysis of Doing Business in China. Journal of Business Ethics, 32(3), pp.191-204.

Garten, Jeffrey E., 1998. Opening the Doors for Business in China. Havard Business Review, 76(3) , pp.167-175.

Lovett, S., Simmons, L. C. & Kali, R., 1999. Guanxi Versus the Market: Ethics and Efficiency. Journal of International Business Studies, 30(2), p. 231.

Luo, Y., 2000. Guanxi and Business. London: World Scientific Publishing Company.

Kaltenheuser, S., 1998. Corruption by the Numbers. Across the Board, 35(10), p.40.

Kwong, J., 1997. The political economy of corruption in China, Armonk (N.Y).: M.E. Sharpe.

Tsui, Anne S. & Jiing-Lih, Larry F., 1997. Where Guanxi Matters: Relational demography and Guanxi in the Chinese Context. Works and Occupations, 24(1), pp.56-79.

Vanhonacker, W., 1997. Entering China: an Unconventional Approach. Harvard Business Review, 66(4), pp.130-140.

Walls, James A., (1990). Managers in the People’s Republic of China. Academy of Management Executive, 4(2), pp.19-32.

Xin, Katherine R. & Pearce, Jones L., 1996. Guanxi: Connections as Substitutes for Formal Institutional Support. Academy for Management Journal, 39(6), pp.1641-1658.

Xiucheng, F & Ambler, T., 1998. Relationship Marketing: Guanxi and its Role in Marketing in China, Working Paper, Nankai Universiry.

Yeung, Irene M. & Rosalie, Tung L., 1996. Achieving Business Success in Confucian Societies: The iImportance of Guanxi. Organization Dynamics, 25(2), pp.54-66.

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