Guanxi in China

The value of "Guanxi" in China influenced every person in this nation. In China, guanxi refers to a vast network of connections arising from party, family and work cennections that may go back several generations. No guanxi network relies ona single individual. Foreigners almost always rely on only one or two individuals for their supposed connection. This kind of network is too fragile to be of enduring value. In the China business environment, foreign investors who think they have created a guaxi network in China are usually simply deluding themselves.

Many foreign investors do not realize that goverment officals in China are regularly moved from offce to office and from region to region. As a result, the connection with a local offcial is unlikly to be a long-term connection. So it is quite common to negotiate a project for several years and then learm that the offcial in charge has been transferred to a new post. Where the project is not in compliance with the law, their replacements will often refuse to sign the documents that have already been negotiated.

In many cases, the provider of guanxi will make use of the fact that the project is not in compliance with the law to ask for addtional benefits. Since the foreign side has no legal resourse, the foreign side must acced to what is in effect a blackmail request or risk to cooapse of the project. When the foreign investor comes to a lwyer to help, there is nothing that can be done, since the project itself is either illegal or poorly documented.

Guanxi is a very beneficial course to learn for foreigners who attend business in China. However, there is also a boundary of between ethical and unethical. Guanxi has linked many offcials in China to jail by corruption.

Link: http://www.chinalawblog.com/2008/02/guanxi_in_china_fugetaboutit.html
Link: http://www.chinasuccessstories.com/2007/08/22/scientific-study-on-guanxi-in-business/