Is “Guanxi” still needed in China?

Guanxi in Chinese means “relationships” and most foreigners and Chinese alike will assure you of the need to have good Guanxi to get business done in China. While I doubt anyone who has done business or lived in China will argue that relationships aren’t necessary here, Shawn He Yuxun, from MeetChinaBiz offers some excellent insight in his blog post into the history of this infamous word Guanxi, its place within China historically and what place Guanxi may have in the future.

In his post, Shawn He Yuxun discusses the history of Guanxi as it relates to requiring personal favors to achieve economic means during a time when China’s economy was completely planned.

Prior to the 1980s, every aspect of China’s economic life was planned, controlled, directed and operated by the government. No private ownership of any property or asset, much less profiteering for an individual or group, was allowed. The government would allocate everyone a pre-defined slice of the “big pie“ (incidentally the equivalent terminology in China — where rice rules the dining table — was “Da Guo Fan“ (da-gore-fun), which means “rice in a big wok“). If one wanted any more than what was allocated to him/her, he/she would have to circumvent the system and rely on another individual in charge of a particular function in that “allocation chain” to do him/her a special favor.

As China began opening up in the 70’s, there was no effective system in place to foster individual economic relationships outside of the planned economy and this Guanxi system.

So by and large throughout the 80’s and most of the 90’s, having Guanxi this “ultra-relationship” or “super-connection“ ALONE had proven to be a sufficient, and in many cases also necessary, condition to get something done, regardless of the fundamentals. With Guanxi, a completely unqualified and incompetent person could land a very important job and/or position. Also with Guanxi, a company with no track record whatsoever could be awarded massive contracts. You get the point…

However, Shawn He Yuxun argues that as certain industries become more privatized, and with a history of economic relationships built outside of the Guanxi system, that Guanxi itself is less important. “Business is business” just like in the west.

As the economy becomes more and more marketized / privatized and competitive, the value and effectiveness of the Guanxi system has also greatly deterioriated. In industries that have been substantially deregulated / privatized or where there is much competition, business is business, and Guanxi has been neutralized / marginalized to resemble just what relationships and connections are like in the Western world.

So what do you think? Is Guanxi still required in China? Is the Guanxi of today different from the Guanxi of yesterday? Let’s hear from our readers about your experiences!

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Comments

11 Responses to “Is “Guanxi” still needed in China?”

Michael on January 6th, 2008 8:00 am

Be sure to check out the other articles on Guanxi on our site as well. Cheers, Michael (www.chinasuccessstories.com) PS Why not put us on your blogroll?
Tim on January 6th, 2008 10:15 am

Actually Quanxi started much earlier than planned economy in China. If you read Analects of Confucius and other teachings of the Confucius school, you will find that “relationship” is what Confucius teaches, to stablize and harmonize the family, society, and the world.

In ancient times, people don’t have information about what is going on, and the only way traders have any sense of “trust” with their trading partners were established by experience with the same person, and recommendation from what they already trusted (families, friends or business partners.) “Webs of trust” were formed and was used for thousands of years after. And this is also reinforce with the philosophy of “you scratch my back and I scratch yours”. Practising of this philosophy strengthens relationships and trusts already established. Family relationship expanded. And we get Quanxi as we know now. This is not only prominent in China, but also in all South East Asia countries.

In the west, there are laws and enforcement of laws to ensure that contracts and agreements are useful to enable trust in the system, not just the trading partner. When just laws and legal systems are not available, business partners or officials have to resort to Quanxi.
The SourceJuice Team on January 6th, 2008 7:36 pm

Tim, thanks for putting this post into an even greater historical context!
Shawn of MeetChinaBiz on January 9th, 2008 1:32 am

Dear SourceJuice Team,

First kudos to you for endorsing and sharing my article on Guanxi. (Much appreciated the kind words…)

I wish to, however, clarify some confusion here, hopefully once and for all. (In fact that very confusion had prompted me to write the article in the first place.)

There is a distinction between “Guanxi” (note the capital “G”, a unique business success factor to China — perhaps more so in the 80’s and 90’s than today) and the usual relationship (or “guanxi” in its original, literal sense) that exists in all human societies.

I believe the reason why so many first encounters of the contemporary Chinese business culture have been puzzled by and thus curious about how “Guanxi” works in China is largely due to its existence in the former sense…

Whereas in the latter case, “guanxi” and “relationship” can very well be used interchangeably, so there is really little need to differentiate them or discuss (much less demystify) the obvious…

I think the interchangeability of the two words in the second sense has in fact created much confusion and thus has contributed to the “Guanxi Myth” (in the first sense, which is a unique Chinese phenomenon in the last 30 some years).

Tim apparently was talking about the “guanxi” in the second sense. Yes, Confucius’ teachings advocate benevolent, just and harmonious relationships among various entities (state, family and individuals, etc.). Yes, Chinese merchants relied on their relationship (interchangeably, “guanxi” in Chinese) network to trade with each other thousands of years ago and thereafter.

But didn’t the Celts, the Greeks, and the early Romans in Europe (and ?? in America - someone who is an anthropologist or archeologist help me here please) at the same time as Confucius need to rely on their “guanxi” (interchangeably, “relationship” in English) network too? And their offsprings thereafter too until there were laws?

If you haven’t had the chance to read the whole article itself, FYI it addresses specifically the “Guanxi” in the first sense and how it differs from that in the second sense which is a universal human phenomenon, should I say, as old as humanity itself…

Hope this is helpful.
The SourceJuice Team on January 10th, 2008 12:05 am

Shawn, thanks for taking the time to clarify. For our readers, I do encourage everyone to read the original article as it’s quite good (in our opinion!). The link again is: http://www.chinasuccessstories.com/2007/12/11/guanxi-chinese-networking/
Shawn of MeetChinaBiz on January 11th, 2008 8:25 pm

Thanks again, SourceJuice!

In fact the original article, along with a number of other China business analysis and comentaries, can also be found at our own website at http://www.meetchinabiz.org/Desktopdefault.aspx?tabindex=5&tabid=197
Zictor on January 12th, 2008 7:12 am

Shawn, I can’t open your website right now, so I haven’t read your post yet.

But anyway, knowing the right people is essential in any society I have come in contact with (Brazilian, German, French Chinese).
Some more gullible of those who come to China are led to believe that in China, guanxi (or Guanxi, I’m not really sure) is the key to everything. But th phenomenon of networking happens in any society. And it has been so for millinia. Each society does so in a different way, but the essence is pretty much the same. After all, aren’t we all human?
Shawn of MeetChinaBiz on January 12th, 2008 1:12 pm

Very well said, Zictor! And many thanks.

I am glad you not only second my viewpoint, but also backed it up with your own international experience.

P.S. If upon clicking the above link it only takes you to our homepage, you may click it again without closing the browser window and the right page should load up the second time.
This is China! on February 9th, 2008 6:09 am

I wrote a seven-part series back in July/August 2007 about guanxi entitled: The Half-Life of Guanxi: Managing Relationships of Obligation with Chinese. The series is based on a lot of hard-won experience with guanxi as well as conversations with Chinese and China Hands on the practice. I think it will supplement what’s already been written in the initial post and what’s been discussed in the comment thread.

Bill Dodson
The SourceJuice Team on February 13th, 2008 7:24 am

Bill, thanks for the VERY thorough information. Your articles on Guanxi are well worth reading.
Paul Tittmann on February 24th, 2008 5:57 am

As in any culture, having a prior relationship with someone helps.

But I’ve found that the intent to do business will usually trump guanxi.