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China ranks as the most populated nation in the world, with more than 1.43 billion of residents which are equivalent to 19% of the globe’s population. This indicates that the Chinese market is destined to have a crucial influence towards the other parts of the world. As one of the global leaders, the economy of China is growing at an exponential rate and is forecasted to surpass the United State of America from the standpoint of economy by year 2020. As a result, it will be significant for corporate with intention to expand or initiate a business in China to comprehend the difference in culture which uphold by the Chinese in order to develop a strong business relationship. The Chinese word ‘Guanxi’ will be constantly mentioned when developing business relations in China. Literally, guanxi is translated as relationship for the abstract meaning. Nevertheless, this translation does not do justice to the profound meaning behind the phrase and the pivotal function in Chinese society. Thus, this research report aims to analyse the term guanxi, discrepancy between Chinese and Western interpretations and its application in business. The research question of the report is whether guanxi equivalent to business success in China.
‘Guanxi’ is a Chinese phrasing which comprised of two Chinese characters. The first character ‘Guan’ can be referred as a gate or door, whereas the other character ‘Xi’ can be referred as a tie or relationship. ‘Guan’ can also be figuratively comprehended as the exclusionary society of social networks in which one inside the society is deemed to be an insider whereas one outside the society is will be treated as a stranger. Together, guanxi can be understand as ‘a gate must be passed in order to get connections’.
The notion of guanxi has a great clout towards the Chinese society as the concept is deep-rooted in Confucianism. Guanxi is a phenomenon of culture which reaches practically every realm of life in the society of China. One of the factors being the legal systems of China are still not full-fledged. This led to lots of the contracts not reinforced effectively by either of the legal forces or the companies in relation to the contracts. In respect to this, reliance on the protection from legal powers became a business risk bears by the corporations which operate in China. Thus, having a strong guanxi between business associates or even between administrators and staff members becomes exceptionally significant.
Relationships in Chinese society do not necessarily all interpreted into guanxi. Generally, guanxi can be divided into various types such as relationship in kinship, friendship, business and so on. In this study, the relationship in business will be the type of guanxi which being analysed. In business communities, guanxi can be interpreted as the status or ability of influencing within a business. Guanxi can also be denoted as the relationships which one possessed some sort of social benefits that may gratify the demand of others. Otherwise speaking, guanxi establishes social obligation which bound individual to provide support when inner circle members require assistance.
The Chinese societies and the westerners have distinct ways in interpreting the term ‘guanxi’. This is due to the different cultural environmental factors from different regions of the globe that discriminate the behaviour of societies. According to the Hofstede’s dimensions, China gains very low score of 20 in the dimension of individualism whereas nation like the United States gains 91. China as the immensely collectivist nation, the society will tend to behave for the benefits of the group and doubtfully of themselves. For instance, the internal considerations of the society will influence employing and the promotion with closer members like family members will receive advantageous treatment. The interpersonal relationships of the society prevail over the mission and corporation. Virtually, the Chinese society believes in the familial collectivism culture meaning that trust is offered to family members only and not to outsiders. On the other hand, individualism culture emphasises on personal objectives and own advantages. Individualist determine individual objectives and aims based on themselves. Moreover, Individualist are pleased to work independently and not being part of a group. Thus, westerners have a very low intensity of interconnection a society sustains amongst its members. In contrary to the Chinese society, members affiliated with ‘in groups’ that support each other in exchange for faithfulness.
In China, utilizing guanxi will establish a social obligation which requires substances of favours in return in the future. It is considered as ethical provided that the obligation created is fulfilled. In comparison to that, westerners consider utilizing guanxi is unethical based on the Western ethics. Occasionally, Western corporates mistakenly comprehend that guanxi as bordering on behaviour which are unethical such as corruption. Regardless, guanxi is a core ingredient for business opeating in China. In other world regions, a deal can be cut just through official business sessions. Whereas in China, spending time with business counterparts during non-business hours is essential, exclusively teatime or dinner banquet . The profundity of guanxi established through time commitment will be more profound compared to Western business relationships.
The importance of guanxi in China has matured as a consequence of the cultural connotations of the rule of law. As mentioned in the report, the deficiency of forceful rule of law in China for millennium. Due to the legal system often being unable to offer the legal protections compared to the west, the Chinese society acquired to develop an alternative to ensures trust among the members in individual and business issues. Thus, guanxi becomes a mechanism of constructing trust which legal systems unable to constantly offer for Chinese society in individual and business issues.
For that purpose, Chinese corporations perceive way more confidence conducting business with a company when strong guanxi has been developed between them. As the Chinese society believes that guanxi greatly facilitated the trust building with their business counterpart. It is correspondingly vital for foreign corporations to develop close guanxi with Chinese corporations and governmental organisations. As this guanxi will facilitates company in problem-solving when conducting business in China. Additionally, Chinese companies possess greater business confidence if the business counterpart were introduced to them by members within the network. As a result, guanxi plays a much more crucial role in China.
Guanxi is an enchanting theme and undeniably stands a vital role in Chinese society. However, inordinately accentuate upon guanxi and omitting the fundamentals of business operations can be perilous. Overreliance on guanxi can be a convenient pretence to the indolence which fails to strive for the business benefits of corporations. Guanxi is an intangible asset which can be powerful and beneficial for business success if handled with cautious and care. Just as Rome does not build in one day, guanxi must be develop and nurture for a long-time basis to be effective for business success. Make the most of guanxi will immensely enhance the feasibility of business prosperity.
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