The Bound between Corruption and Guanxi in the Chinese Society - Coursework Example

 EXPLORING CHINA RESEARCH ESSAY – THE RELATIONSHIP BETWEEN CORRUPTION AND GUANXI IN THE CHINESE SOCIETY Introduction The past years were marked with an increased interest toward the topic of Guanxi in China, its ethical character and relation to corruption. Actually, the link of Guanxi to corruption remains the topic of a hot debate. Dozens of studies were performed in an attempt to identify how corrupted Guanxi is and whether it can be considered to be a form of corruption at all. This work aims to discuss the concept of Guanxi in more detail and to determine if Guanxi can be considered as a form of corruption. For the purpose of the paper, a brief literature review will be performed, to evaluate the role and importance of Guanxi concepts in increased corruption in socialist China. Guanxi and corruption: Defining the terms The current state of literature provides an insight into what Guanxi is and how it works. Understanding the meaning of Guanxi is of vital importance for everyone who seeks to look deeper into the significance of corruption in the Chinese business system. Surprisingly or not, different authors provide different meanings of the term Guanxi. However, these differences are natural and even anticipated, given the complexity of the Guanxi concept and the multitude of meanings which it comprises. According to Chaterjee, Pearson and Nie, the Chinese definition of Guanxi is hard to translate in one phrase – countless meanings are included in it, and it is fairly considered as one of the most impactful phrases in Chinese business contexts.1 However, it is possible to say that Guanxi can be roughly divided into the three basic groups of meanings: first, Guanxi presupposes the development of a relationship between people with a similar status; second, relevant and continuous connections between people; and third, contacts with people with little or no direct interactions.2 For the Chinese people, Guanxi exemplifies a type of special relationships in which one person needs something and another person has something to give. Guanxi is a highly dynamic form of relations between business people in China. Furthermore, even if a person who has resources and opportunities to solve a problem enters a Guanxi relationship, he (she) is not obliged to solve such a problem or respond to another individual’s request.3 Third, Guanxi is not a continuous phenomenon but emerges only the moment a person needs another person to do something important or solve some problem. Finally, Guanxi is almost always a sequence of previously planned activities aimed to resolve a business or personal issue.4 Here, western managers and people come to view Guanxi as a form of corruption, as long as such activities and relations may range from a simple meal together to giving gifts or doing favors.5 However, whether Guanxi can be considered as a form of corruption remains a difficult question. Luo (2004) writes that corruption is nothing but “individual bureaucratic behavior which deviates from the norm or violates rules specified by a given political context, with the motives for private gains accrued from his or her public roles”.6 Based on this definition, corruption is characterized by several principal features. First and foremost, corruption is inherently perceptual, meaning that it always relates to how the public perceives individual behaviors and decisions.7 This means that gift-giving and favor-doing in the Chinese business context may not be viewed as a corruption but a natural process of establishing mutually productive relationships between business partners. Second, corruption is always contextual, and in different cultures, corruption will mean different things.8 Third, Luo is confident that corruption is power-related, because to make corruption possible, a bribee must occupy a position of power and take a place which gives him (her) some kind of institutional authority.9 Fourth, corruption is always norm-deviated and intentional – regardless of the context, corruption always marks the fact of deviating from norms or legal requirements and is impossible without individual intention to earn personal gain from it.10 Finally, corruption is always covert, meaning that it is always veiled and hidden from the public eye: for example, informal and oral non-documented relations are a preferred form of corruption in any country.11 This is, actually, why Guanxi is sometimes believed to be a form of veiled corrupted relations between individuals and business bodies in China. However, it appears that corruption and Guanxi display a range of distinctions and differences. First, where corruption is a form of deviating from a social or legal norm, Guanxi is initially an indispensable component of the social norm in China.12 Historically, the process of exchanging favors as a part of establishing reciprocal relations between individuals has always been a fundamental element of the Chinese culture. In distinction from corruption and bribes, Guanxi does not involve any threats in case of failure and only entails a variety of social consequences for all participants of the Guanxi relationship.13 Where corruption aims to establish and use a short-term transaction, Guanxi is built on the benefits of long-term relations.14 However, contemporary business relations also imply that the fact of corruption can readily contribute to establishing long-term productive relations with other business entities and markets: for example, a bribe given to a government official for the opportunity to enter a new market is an effective way to expand any company’s market presence. Researchers claim that corruption builds on a commodity, whereas guanxi builds on trust15; however, corruption without trust is virtually impossible, as long as both parties of this relationship require confidence and guarantees that the deal will not fail and will not lead to negative legal consequences. As a result, guanxi and corruption are more similar than different, and it is essential that Chinese managers, like their Western counterparts, can see the Guanxi’s potential to transform into a system of generating unethical profits in the country. Literature review Guanxi is an essential component of the Chinese society and culture, and its relation to corruption has already become a topic of the hot scholarly debate. While Chinese officials and business people treat Guanxi as vital for their financial and business success, Western managers consider Guanxi as a serious obstacle to establishing productive relations with their Chinese partners. Guanxi networks emerged as a result of centuries-old complex social relations, Confucian mentality, and strict social hierarchy. The modern state machine in China was formed under the influence of the Soviet bureaucratic relations, with multistage hierarchy and high level of bureaucracy. For the most part, Guanxi is believed to be an ideal environment for cherishing corruption; the latter, in its turn, exerts negative influences on the quality of business relations in public and private sector. The current state of literature offers an insight into how Guanxi works in Chinese culture and impacts business relations with the Western partners. Contrary to previous beliefs, Guanxi can be equally the source of benefits and the instrument of negative influences on the development of business in China. It appears that ethical dilemmas characteristic of Guanxi are well-known to the Chinese managers working in the Chinese sector of business. Chinese managers recognize the ethical difficulties which Guanxi presents to Western business partners.16 However, contemporary researchers unanimously agree that Chinese managers treat Guanxi as an essentially ethical dimension of doing business in China. Jatterjee et al write that “the consensus across categories of managerial level, age, educational status and industrial type suggests the respondents’ ethical dimension of the practice of Guanxi was positive and moral.”17 Vanhonacker continued this line of research and wrote that Western managers view Guanxi as unethical and corrupted, but China considers Guanxi as an effective way to create an obligation an individual or business will need to fulfill at a later date.18 Guanxi relations as such revolve around the principles of continuity and long-term expectations and imply the need for all parties to possess a degree of moral integrity and not abuse the target of the favor.19 Apart from the fact that Western cultures treat Guanxi as a form of corruption, they also believe in using Guanxi as an incidental instrument of establishing relationships and gaining a short-term benefit that will work in the long run. However, only a long-term orientation can secure managers from getting into a business trouble.20 Contemporary research shows that Guanxi can be a serious benefit to those who are willing to conduct business in China. For example, Lo and Everett discussed the benefits of Guanxi to the regulatory environment in e-commerce.21 The authors are confident that Guanxi can successfully work for the benefit of local alliance partners – put simply, Guanxi is the direct pathway to establishing trust in relations with partners.22 Guanxi works to foster collaborative relations between partners, “enhances mutual trust, and facilitates the transfer of local knowledge to foreign partners”.23 Guanxi networking provides conditions needed to build effective relations with the executives of other local firms, which greatly contribute to the success of any business endeavor.24 China have great potential to allocate vital business resources and take important steps changing and expressing the need to change the existing regulatory networks and support business initiatives is impossible, unless Chinese businesses engage in Guanxi.25 These, however, are the benefits that are mostly accessible to the Chinese managers and businesses. Western managers face serious obstacles in their striving to establish productive business relations with their Chinese partners and often fail to enter the Chinese market. More often than not, Guanxi is considered as the major obstacle in the businesses’ way to becoming successful in China. Foreigners and Guanxi is a frequent topic of discussion by scholars. Guanxi is believed to be a formidable obstacle whenever Western companies fail to create productive relations with their Chinese partners and, more importantly, when the latter fail to follow the basic conditions of the business contract.26 In his article, Seligman discussed the case when the Chinese court refused to accept a lawsuit from the western company, simply because the companies in China maintain excellent relationships and refuse to cooperate with western managers, even if they are legally correct.27 The case confirms the importance for managers from the West to build Guanxi relations on their own but it does not support a hypothesis that Guanxi is inseparable from corruption. Nevertheless, several ethical complexities in the Guanxi context are worth being noted. It appears that Guanxi has a potential to reduce the social wealth.28 An established social practice, Guanxi seems to benefit a few Chinese managers at the expense of thousands of Western firms and individuals.29 Guanxi often results in a serious violation of fiduciary duties.30 Guanxi is the source of continuous disagreement and is not always supported by the members of relevant communities.31 Guanxi can even violate ethical hypernorms – for example, a Chinese official that allows a western firm to bypass the product approval process distorts the balance of forces and denies the principles of equity and competition in business.32 So, are Guanxi and corruption inseparable? Discussion The literature review reveals several important implications for businesses that are willing to do business in China. First, Chinese managers are perfectly informed about the ethical difficulties that arise whenever Western businesses seek to enter Guanxi but, nevertheless, continue treating Guanxi as their personal asset.33 That means that whenever there is an obligation created via Guanxi, it is always attributable to a specific individual and not the organization as a whole. Rarely or never can Guanxi be elevated to an organizational level, and this fact creates considerable difficulties for Western managers. This fact implies that Western businesses entering China must do a favor to a person who can resolve their expansion issues and difficulties. However, these attitudes go against the basic ethical beliefs in the Western culture and turn Guanxi into a form of corruption. Second, Guanxi often serves a serious obstacle to developing productive business relations with China. Western business ideology is founded on the principles of equity and freedom of competition, and Western managers do not find any support of these values in China. A community of bureaucrats supports Guanxi as long as it benefits their own interests and gives them some form of competitive advantage whenever they have to deal with Western firms. In Guanxi, western and Chinese managers represent the two opposite sides of one and the same business barricade, and the conflict of interests and values makes it extremely difficult for the former to meet their business goals. Third, to eradicate or violate Guanxi is virtually impossible given that it is the vital element of the Chinese culture and business values. More importantly, as long as Chinese managers continue treating Guanxi as an ethical practice, their western partners will have but to comply with these cultural requirements. In light of these findings, it seems unbelievable and even unexpected that Guanxi could become a form of corruption in China. These difficulties in interpreting Guanxi are easy to justify. To begin with, Guanxi operates through a number of forms and at times, the reasonable boundaries of business relations are being crossed, to follow the principles of Guanxi in China. These cases, however, are rare and require additional analysis. Furthermore, that Western managers treat Guanxi as a form of corruption reveals their cultural unawareness and even ignorance: obviously, a better understanding of the Chinese culture and acceptance of the business norms could facilitate the development of business relations between the East and the West. Finally, the current state of business environment in China displays a tendency toward changing the norms and standards that distort the development of global business stability. Not all forms of Guanxi are related to corruption, and not all forms of gift giving are the displays of unethical attitudes toward business in China. Managers must be aware of the forms of Guanxi that violate the basic business norms and learn more about Guanxi and its benefits, to be better prepared to use Guanxi as the instrument of entering the Chinese business environment. Conclusion Guanxi and its relations to corruption have long been discussed by scholars. Guanxi encompasses a variety of meanings and is difficult to translate from Chinese. The results of the literature review shows that Chinese managers treat Guanxi as ethical and necessary component of their business relations with partners. Contrary to previous beliefs, Guanxi can be extremely beneficial to businesses. Despite a wealth of literature on the topic, Guanxi has nothing to do with corruption but reflects the long-standing cultural beliefs in China. However, some extreme forms of Guanxi often cross the reasonable boundaries of business ethics and result in the violation of legal norms. Western managers must develop better awareness of the Chinese cultural beliefs and prepare to deal with the forms of Guanxi that violate the fundamental business norms. In this way, they will succeed in establishing productive relations with their Chinese partners and will become the integral participants of the Chinese business environment. BIBLIOGRAPHY Bian, Y. “Guanxi and the allocation of urban jobs in China.” The China Quarterly 140 (1994): 971-999. Chan, K.M. “Towards an integrated model of corruption: Opportunities and control in China.” International Journal of Public Administration 23, no.4 (2000): 507-515. Chatterjee, S.R., Pearson, C.A. & Nie, K. “Interfacing business relations with Southern China: An empirical study of the relevance of Guanxi.” South Asian Journal of Management 13, no.3 (2006): 59-75. Dunfee, T.W. & Warren, D.E. “Is Guanxi ethical? A normative analysis of doing business in China.” Journal of Business Ethics 32, no.3 (2001): 191-203. Leiken, R.S. “Controlling the global corruption epidemic.” Foreign Policy 105 (1996): pp.55- 73. Lo, W.W. & Everett, A.M. “Thriving in the regulatory environment of e-commerce in China: A Guanxi strategy.” S.A.M. Advances Management Journal 66, no.3 (2001): 17-24. Luo, Y. Guanxi and Business. London: World Scientific, 2007. Riley, N.E. “Interwoven lives: Parents, marriage and Guanxi in China.” Journal of Marriage and Family 56, no.4 (1994): 791-801. Seligman, S.D. “Guanxi: Grease for the wheels of China.” The China Business Review 26, no.5 (1999): 34-38. Vanhonacker, W.R. “Guanxi networks in China.” The China Business Review 31, no.3 (2004): 48-52. Read More