Impact of Guanxi on Business in China Classical Chinese culture was predominantly rural and established within the family. The prevailing cultural belief of Confucianism underlined the Chinese interdependence of socialization. Businesses relied more on guanxi, simply meaning connections and shared commitment, than laws and other terms and conditions. The first source is a JSTOR journal article written by Eric W.K. Tsang. It talks about how, even though guanxi can most certainly provide a competitive advantage to businesses, it could also be difficult to sustain. This source has been chosen since it gives an overview of how and why guanxi can have a positive impact on businesses. What makes this article credible is that it backs up its claims by referencing the works of other reputable authors and journalists such as Lucian Pye and Fox Butterfield. Throughout this article, Tsang suggests ways for companies to protect their guanxi because he believes it is something “valuable” and can be used to expand businesses more easily. “What is special about Chinese society is the fact that guanxi is ubiquitous and plays a crucial role in daily life.” (Tsang, 1998) In order to back this claim, the author references to Fox Butterfield’s book , China: Alive in the Bitter Sea, where he writes, “Guanxi provides the lubricant for Chinese to get through life…As a result, the Chinese have turned the art of personal relations into a carefully calculated science. There are even people who live entirely on their guanxi.” Even though according to Tsang guanxi is valuable and “rare”, he remains uncertain about its sustainability. This is due to the fact that he considers guanxi to be extremely delicate relationships that can be disturbed by very minor inconveniences, such as staff mobility for instance. Regardless, Tsang firmly believes that businesses in China would not run as smoothly without guanxi. On the other hand, the second article from CNBC news focuses on the negative impacts guanxi can have on foreign businesses in China. Throughout this article, big American corporations such as Home Depot, Mattel, eBay and Google can be seen to be expressing their failures within the Chinese markets. This article has been chosen to highlight the fact that the establishment of guanxi has its fair share of downsides for the outside world. EBay especially, considers itself to have been a victim of the guanxi culture in China. “The problem was that eBay had no mechanism for stimulating guanxi… While Taobao allowed buyers and sellers to chat over instant-messaging, giving them a chance to establish a personal connection, eBay did not.” (Carlson, 2013) Considering this, it can be said that guanxi does generate an imbalance of opportunities between corporations. In conclusion, the two articles highlight the fact that guanxi can have both positive and negative impacts on business in China. Quanxi is very much capable of giving a significantly high competitive advantage to local businesses, which is why the Chinese community value it as much. However, considering the point of view of the Chinese economy, guanxi is more likely to have a negative impact on foreign corporations rather than local ones. Additionally, the fact that the Chinese community prioritizes and provides more opportunities for local corporations could also eventually lead businesses to participate in illegal activities such as corruption or bribery. Bibliography - Tsang, E.W.K. (1998) Can guanxi be a source of sustained competitive advantage for ... JSTOR, Academy of Management. Available at: https://www.jstor.org/stable/4165458 (Accessed: October 25, 2022). - Carlson, B. (2013) Why Big American Businesses Fail in China, CNBC. CNBC. Available at: https://www.cnbc.com/2013/09/26/why-big-american-businesses-fail-in-china.html (Accessed: October 25, 2022). - Wenderoth, M.C. (2018) How a better understanding of guanxi can improve your business in China, Forbes. Forbes Magazine. Available at: https://www.forbes.com/sites/michaelcwenderoth/2018/05/16/how-a-better-understanding -of-guanxi-can-improve-your-business-in-china/?sh=3e0abab05d85 (Accessed: October 25, 2022).
