Guanxi refers to connections among individuals involving implicit expectations of loyalty, obligation, and mutual commitment. The concept includes both formal and informal on-going relationships. The term is not generally used to describe interpersonal relationships within a family, although
guanxi obligations can sometimes be described in terms of an extended family. Essentially, familial relations are the core of one's interpersonal relations, while the various non-familial interpersonal relations are modifications or extensions of familial relations. An individual may view and interact with other individuals in a way that is similar to their viewing of and interactions with family members; through
guanxi, a relationship between two friends can be likened by each friend to being a pseudo elder sibling–younger sibling relationship, with each friend acting accordingly based on that relationship (the friend who sees himself as the "younger sibling" will show more deference to the friend who is the "older sibling").
Guanxi is also based on concepts like loyalty, dedication, reciprocity, and trust, which help to develop non-familial interpersonal relations, while mirroring the concept of
filial piety, which is used to ground familial relations. Ultimately, the relationships formed by
guanxi are personal and not transferable.
In a business context In China, a country where business relations are highly socially embedded,
guanxi plays a central role in the shaping and development of day-to-day business transactions by allowing inter-business relationships and relationships between businesses and the government to grow as individuals representing these organizations work with one another. Specifically, in a business context,
guanxi occurs through individual interactions first before being applied on a corporate level (e.g., one member of a business may perform a favor for a member of another business because they have interpersonal ties, which helps to facilitate the relationship between the two businesses involved in this interaction).
Guanxi also acts as an essential informal governance mechanism, helping leverage Chinese organizations on social and economic platforms. In places in China where factors like the structure of local government and the impact of government policies may make business interactions less efficient to facilitate,
guanxi can serve as a way for businesses to circumvent such institutions by having their members cultivate their interpersonal ties.
Guanxi is important in two domains: •
social ties with managers of suppliers, buyers, competitors, and other business intermediaries; and • social ties with government officials at various national government-regulated agencies. In each case, a dynamic assessment would ask which of these stages had been reached in a particular business relationship. The nature of
guanxi, however, can also form the basis of
patron–client relations. As a result, it creates challenges for businesses whose members are obligated to repay favors to members of other businesses when they cannot sufficiently do so. In following these obligations, businesses may also be forced to act in ways detrimental to their future, and start to over-rely on each other. Members within a business may also start to more frequently discuss information that all members knew prior, rather than try and discuss information only known by select members. If the ties fail between two businesses within an overall network built through
guanxi, the other ties comprising the overall network have a chance of failing as well. The link between
guanxi and corporate corruption was very strong during the period of American
foreign direct investment in the 1990s. Western executives learned about the practice of
guanxi during preparatory courses before leading expansions in China. Once leaders were on the ground they often experienced systemic requirements for transactional kickbacks. Securing basic operational needs like construction permits routinely required under the table payments. Furthermore, the reliance on
guanxi enabled local political leaders to force foreign firms into hiring specific regional contractors, ensuring that local deputies received direct financial kickbacks from the mandated partnerships. Note that the aforementioned organizational flaws
guanxi creates can be diminished by having more efficient institutions (like
open market systems that are regulated by formal organizational procedures while promoting
competition and innovation) in place to help facilitate business interactions more effectually. However,
guanxi only becomes nepotism when individuals start to value their interpersonal relationships as ways to accomplish their goals over the relationships themselves. When interpersonal relationships are seen in this light, then, it is usually the case that individuals are not viewing their cultivation of prospective business relationships without
bias. In addition,
guanxi and nepotism are distinct in that the former is inherently a social transaction (considering the emphasis on the actual act of building relationships) and not purely based in financial transactions, while the latter is explicitly based in financial transactions and has a higher chance of resulting in legal consequences. However, the issue of
guanxi as a form of
government corruption has been raised into question over recent years. This is often the case when businesspeople interpret
guanxi's reciprocal obligations as unethical gift-giving in exchange for government approval. The line drawn between ethical and unethical reciprocal obligation is unclear, but China is currently looking into understanding the structural problems inherent in the
guanxi system.
In a diasporic context Guanxi can be used as a school of thought that influences how ethnic Chinese think of and view society. The Chinese in the diaspora are more likely to adhere and connect to the group of people with shared background. Moreover, diasporic communities might possess ties with individuals in their home country. Guanxi allows the diaspora to maintain their networks and foster close relations with people in their home country and form a subethnic enclave within society. Guanxi could also influence how the diaspora assimilates into the host country, and how the diaspora deals with racism in society. Groups that could be studied are Chinese-Americans, Chinese-Indonesians who have faced prejudice in their host countries. Marred by the
LA massacre in 1871,
Saigu in 1992, the
Japanese American internment during World War II, and the idea of the "Hindu Invasion", the Asian Americans already in the United States faced discrimination from the wider American society. They had to find solutions based on trial and error, looking for legal, political, and social ways to find their place in society. ==Ethical concerns==