By Dr Michael Baron, 10 February 2018
“Corruption’’ in China
In recent years, Chinese government and society have been coming under fire for “corruption and lack of transparency’’. Transparency International currently ranks China 79th out of the 176 nations rated on its Corruption Perception Index, putting it well behind the ‘’Western-style democracies’’. Likewise, GAN Business and Anti-Corruption Portal put together a Country Report on China that provides a picturesque description of what it is like for a foreigner to do business in a country where there are no civil freedoms and the entire economy is centrally-managed, either directly or indirectly. The report suggests that virtually each and every aspect of the Chinese society is subjected to government intervention and bribery. Furthermore, there are rather transparent accusations that the two (intervention and bribery) often come hand-in-hand.
While the corruption accusations are not completely groundless and there is indeed a wide range of socio-economic developmental problems that the Chinese society currently faces I believe that many of the critics are somehow ignoring the rather important fact that China has never been managed as a Western-style economy. Therefore, our definition of corruption is not always applicable in China.
China has always been a collectivist society, where business and social activities had to be carried out with a broader community in mind. Despite the evident modernization of the Chinese economy and society, the collectivist concepts are still very much alive and often prevail over purely contractual agreements! By entering into a business contract with a Chinese company, we are also entering into a long-term collaborative relationship that is going to be mutually beneficial over the years in more than one way. This makes doing business impossible without getting engaged with your business partners at a personal level. We need to support each other not only with the business-related matters also on a broader scale.
What is ‘’Guanxi’’?
From our perspective, using personal connections (particularly in cases of public servants) to assist others is firmly perceived as a sign of corruption. However, in China – it could be instead viewed as “guanxi’’. The very concept of is very foreign to majority of the westerners (particularly the ones who have never been to China or other collectivist societies). The uniqueness of the concepts is also confirmed by the fact that in the English language, there is no direct equivalent for the word. Now that China is open to the world, and this aspect of the Chinese society has to be acknowledged, the Oxford Dictionary does include the word ‘”guanxi”. While the English language does include many words that have been ‘’borrowed’’ from other European languages such as French, adoption of a Chinese word is rather uncommon, particularly if the word is so difficult to pronounce (/ɡwanˈʃiː/). This is yet another acknowledgement of the uniqueness of the “guanxi’’ concept.
As evident from the passages above, an understanding the concept of ‘’guanxi’’ is absolutely essential for anyone who has an intention to do business in China or to establish a working (or in some cases even social) relationship with a Chinese national. I have been discussing the concept of ‘’guanxi’’ with several Chinese-born friends or colleagues. Even for them, providing a definition that summarizes the full impact and meaning of ‘’guanxi’’ tends to be difficult. The definition also varies depending which part of China and which particular socio-economic background the person comes from. Luo, Ying and Wang (2011) pointed out that ‘’guanxi’’ has been formed (and been evolving over the years) from the Chinese social philosophy of confucianism, and therefore underlines the importance of associating oneself with others. The emphasis is implicit mutual obligations, reciprocity and trust. However, despite ‘’implicit’’ nature of ‘’guanxi’’, the arrangements achieved are explicit to all of the parties involved.
The moral dilemma: To accept or not to accept “guanxi’’ – that is the question!
Just like many other “westerners’’, when I first learned about the concept of ‘’quanxi’’ I found it difficult to make up my mind whether this very concept is morally acceptable to me or not! On the one hand, I found the fact that doing business, establishing social relationships, and even doing political deals with China is impossible without relying on establishing strong ties with individuals who are in ‘’power’’ rather disturbing. My company (Baron Consulting) has been proactive in tapping into the Chinese market as well as in delivering a range of business services to the Chinese companies in Australia. However, the last thing I have ever wanted is to get involved in activities that I wholeheartedly regard as ‘’immoral’’. Growing up in Russia, I could see a lot of bribery going on around me and even little trivial things could not be done without some money being passed “under the table’’. I have always despised such business dealings – particularly if they involved government officials or people who were allocating/managing resources other than their own. I knew that I will never do it and neither would other law-abiding and morality-conscious citizens.
On the other hand, I started to realize that in many cases, ‘’guanxi’’ does not involve bribery. The concept is far more profound and complex when compared with our definition and understanding of what ‘’corruption is’’. When I think about ‘’guanxi’’ somehow ‘’friendship with benefits’’ expression comes to mind: people are ‘’assisting’’ each other to achieve goals and objectives due to their own self-interest that can also be fulfilled as a result of the deal. True, a marriage of convenience or an arranged marriage is not always a ‘’love’’ marriage, but some of these arrangements do work out amicably!
Another positive aspect of ‘’guanxi’’ is the longevity of such relationships (both business and social arrangements). Once the parties find each other and the relationship is established, it is very common for the networks to keep growing. In a nutshell, I will keep introducing my ‘’useful friends and contacts’’ to my ‘’business partners’’ and they will do the same for me. When the process continues for decades, the trust and the level of support within the networks keeps growing! Fear of losing ‘’face’’ in front of the peers who belong to the same socio-economic network is certainly a very important factor in making people true to their word and not letting their partners and associates down.
There could be little if any moral justification for corruption. It is not only based on dishonesty but is also destructive for societies in the longer term. Similar to Australia, the Chinese government is undertaking serious measures to minimize the impact of corrupt individuals on its business and political scenes as well as attempting to reform institutions that are recognized as corrupt. As Skidmore (2017) points out, since 2012 (The year president Xi Jinping came to power) the anti-corruption campaign has been achieving truly amazing results. Not only many government officials were removed from their posts or even arrested along with their accomplices from the business circles, but also the very nature of the business and political leaderships is changing. People are becoming increasingly appreciative of the benefits (including being able to sleep well at night rather than fear of being arrested) of doing things legally. However, ‘’guanxi’’ lives on! While we can keep debating its pros and cons, we’ve got to remember that it is a Confucian concept and it has already survived many centuries. As it is not going to go away (and why should it?), we should do our level best to understand it better. This will help us better appreciate Chinese society, its culture and the business opportunities it provides!
Dr Michael Baron grew up in Russia and, after migrating to Australia, graduated with a degree in politics from Melbourne University at age 19. He has a PhD in Business Marketing from Curtain University and teaches business-realed subjects. He is the CEO of Baron Consulting.
Confucianism definition (2018): https://en.wikipedia.org/wiki/Confucianism, accessed Feb 4th,2018
Corruption definition (2018): https://en.wikipedia.org/wiki/Corruption, accessed on Feb 4th, 2018.
Gan Business and Anti-Corruption Portal (2018) China Corruption Report: https://www.business-anti-corruption.com/country-profiles/china, accessed on Feb 4th, 2018.
Guanxi definition (2018): https://en.wikipedia.org/wiki/Guanxi, accessed on Feb 4th, 2018.
Luo, Yadong, Ying Huang, and Stephanie Lu Wang (2011) “Guanxi and Organisational Performance: A Meta-Analysis.” Management and Organization Review 8.1 (2011): 139-72.
Skidmore, D. (2017) Understanding Chinese President Xi’s Anti-corruption Campaign. The Conversation. October 27th, 2017: https://theconversation.com/understanding-chinese-president-xis-anti-corruption-campaign-86396, accessed on Feb 4th 2018.
The Oxford English Dictionary (2018): https://en.oxforddictionaries.com/definition/guanxi, accessed on Feb 4th, 2018.
Transparency International (2016) Corruption Perception Index: https://www.transparency.org/country/CHN, accessed on Feb 4th, 2018.