The visitors who have been reading this blog over the past few months, by now might have a good understanding of what makes the “Eastern” and the “Western” approaches to business so different from each other.
One of those factors - perhaps the most important one - is the concept of “relationships”:
While for the members of Western cultures the development of personal relationships with their stakeholders is often a consequence of successful business dealings conducted together, for the members of Eastern societies personal relationships are the foundation upon which long-lasting and mutually rewarding business relationships are built.
This week Mudita is honoured to share an insider’s perspective on Guanxi, as explained by Calipe Chong: a Singaporean-born and raised businessman who has worked for US corporations for nearly three decades before he started providing supply chain services in Suzhou, China, and author of the book “Understanding China: An Insight into the History, Civilization, and On-going Transformation”.
(reposted from Calipe’s business blog)
“Guanxi,” a concept often discussed but not understood by foreigners, literally translates as relationships. Guanxi is not just a network of relationships among business partners or with government officials that collaborate and support one another. And it is not something that resulted from the communist administration. Rather, it has evolved through 5,000 years of Chinese history.
Its roots originated with the imperial administrations that ruled China for the past five millenniums. The imperial administration was overthrown in 1911 with the revolution that brought down the Qing Dynasty by Dr Sun Yat Sen. Guanxi was still prevailing under the reign of the Kuomintang government and later the Communist Party of China, just as it is still a prevailing culture developing Guanxi.
The emperors had supreme powers and could do whatever they liked. They amassed others’ wealth into their treasuries and every two or three years, officials from various locations would send beautiful maids to the palace. Some of the emperors acceded to their throne through murdering their siblings and relatives or simply rebelled and killed the previous emperor. Thus, the emperor defended his throne at all cost and would not hesitate to execute anyone attempting to seize his throne. Not only were the conspirators executed but all their related families, including in-laws, relatives, servants, and friends who were either beheaded or banished. It was common to see hundreds of lives lost due to a relationship to one conspirator alone. This was a strong deterrent to others from attempting to take over the throne.
The whole country was under a one-man rule and everyone had to obey him. “Do what I tell you and not do what I do” was a very common practice of the leaders. With this form of ruling, persons whom the emperor liked would enjoy preferential treatment and immense power. One had to continually please the emperor to safeguard his position and life while providing a luxurious lifestyle for his family members and relatives.
Royal family and officials abused their power and caused immense hardship to commoners. Land, wealth, property, women, and children were forcefully taken from them to satisfy the greed and lust of the oppressors. If the officials were caught for any unlawful act or misdeeds, they would bribe the royal family or officials close to the emperor to spare them. There was also a strong connection between government officials and the wealthy landlords and businessmen. The landlords and businessmen would bribe the officials who in turn provided them with the protection and liberty to abuse.
Throughout Chinese history, the majority of the population was poor plebeians and craftsmen. There was literally no way for them to break the poverty line unless through uprising, becoming bandits, the imperial examination, and of course, Guangxi. Every few years, an imperial examination was held to identify scholars with academic intelligence. They would then be given governmental posts. And they soon learned the Guanxi requirement and the unwritten rules to get to the top.
To understand how Guanxi evolved in China, one has to understand the power structure of the emperor and his relationship with the royal family, government officials, generals, landlords, and wealthy businessmen. It was a pyramid of power where the emperor was right at the top and the commoners were at the bottom. Protection and favor were passed down to next lower level in exchange for loyalty and wealth (bribery, in today terms). The higher echelon needed the loyalty from the bottom to stay in power and to fight against his rivals. In return, the lower echelon received the protection and favor to obtain more wealth, influence, and status.
Guanxi was the cement that bonded these layers. It contained the ulterior interest, conspiracy, wealth, power, influence, and jealousies between the upper and lower echelons. Guanxi was used by individual groups to serve their own interest and motives. New members had to pay the cost to join and obtain consensus from the group. If the group lost the favor of the emperor, it would crumble immediately and all members in the group perished in the execution square.
On the other hand, Guangxi was also used simply as a relationship among friends and relatives. It facilitated mutual help, networking, financing, resolving disputes, etc. The Chinese lived in a close-knit society and relied on the network of Guanxi to live by.
Guanxi was also the mechanism that provided the connection in this complex intertwined hierarchy. One needed it to move up the hierarchy, to bully others, to increase wealth, to take others’ property or family members as slaves or concubines, to be respected by others, to remove rivals, or merely for survival.
Guanxi was established through various means such as:
a. Offerings of cash, expensive gifts, land, property, and beautiful girls. This was the most common form as greed was man biggest weakness. Gifts or cash were given during festive seasons, birthday, anniversaries, or any happy occasions celebrated by the elders or leaders. It was such a strong custom that it was deemed imprudent for someone not to bring gifts on such occasions.
b. Doing someone a favor. This is a typical example “where you scratch my back and I will scratch yours.” It is also a way to secure bondage between two parties. They might help to secure jobs for their friends, matchmaking, approach friends who were in authority to help another friend to settle matters, etc. However, they would expect favors to be returned when their woes or needs appeared later. Anyone who did not return the favor was considered unfaithful and would be scorned and avoided by others.
c. Protecting the group. A common practice for government officials was to discard evidence or trials against their subordinates or peers. Often the plaintiffs were tortured or killed to hide the truth. This was to protect the group interest or to establish Guanxi.
d. Marriage of their children. This was a common tactic that even the emperors used to ensure neighboring countries did not attack them. Princes were married off to those countries to seal alliances. The officials and businessmen used it to pledge loyalty and secured their relationship. Sometimes, marriage vows were made by both sides during the wives’ pregnancy. When the babies were born, they would either become sworn brothers or sisters if they were of the same sex; otherwise they would be husband and wife if they were of different sexes.
e. Feasting. Sumptuous feasting was (and is) a way to show friendship and sometimes a way to show others the relationship one had with the diners. Drinking was almost mandatory as one needed to show others their willingness to foster friendship. Drinking to Chinese was like smoking a peace pipe to Native Americans. The Chinese believed you could see each other’s behavior at a dining table and especially so when someone was drunk. This helped them determine whether they could accept each other or not.
f. Pledging loyalty or admiration. A common ploy was writing a poem or verbalizing admiration or loyalty. This was often used when one did not have access to the person in power.
g. Killing the foe of others. A strategic and unilateral move where one killed or disposed a foe of the person he wanted to establish relationship with. Alternatively, one could declare animosity to a foe of the other party to secure trust and attention.
Though we do not have an emperor today, the political environment has not changed regardless whether in a government body or business world. I am glad to note that the importance of Guanxi is diminishing with the open and direct interaction that China is making with the outside world. One cannot rely on Guanxi to obtain unlawful treatment or agreement from government officials. Once exposed, both the officials and takers will be brought to justice and can be assured of proper punishment.
Giving gifts of less value to higher authority or elders is considered giving respect, not bribery. It is very difficult to draw a line to say it is a form of bribery. Not too long ago, it was customary to send mooncakes or other food to government officials during festivals. The purpose was to clinch a favor from the officials or to avoid disdain from them. Fortunately, such practices no longer prevail. Some officials are rejecting the gifts in order to follow the directions from the central government.
You can use Guanxi to ease business operations or expedite an application, but not for any unlawful means or advantage. It is beneficial to find the right connection to the appropriate government officials to clarify some confusing policies, legislation, or application processes. This helps to prevent falling into a perpetual round of application rejections and delays with more money and time spent unnecessarily.
The custom of giving a helping hand and showing courtesy will continue to be the norm in China as in all gracious societies. A welcome or birthday gift is appreciated as a gesture of friendliness. The issue is not to expect favor in return. The immense response from the public in recent disasters demonstrated Chinese virtue and strength.”
To me, the chance to share someone’s post about their own culture on this blog feels like a major privilege.
Through Mudita, I will always seek to promote something I deeply value: “localized”, insider sources of expertise within a certain country or a certain community.
Did you know that most of the “psychological knowledge” we have access to revolves around the understanding of the world according to a few WEIRD (Western, Educated, Industrialized, Rich, and Democratic) societies ?
“Behavioral scientists routinely publish broad claims about human psychology and behavior in the world’s top journals based on samples drawn entirely from Western, Educated, Industrialized, Rich and Democratic (WEIRD) societies. Researchers - often implicitly - assume that either there is little variation across human populations, or that these “standard subjects” are as representative of the species as any other population. Are these assumptions justified?
Who are the people studied in behavioral science research?
A recent analysis of the top journals in six sub‐disciplines of Psychology from 2003‐2007 revealed that 68% of subjects came from the US, and a full 96% of subjects were from Western industrialized countries, specifically North America, Europe, Australia, and Israel (Arnett, 2008). The make‐up of these samples appears to largely reflect the country of residence of the authors, as 73% of first authors were at American universities, and 99% were at universities in Western countries. This means that 96% of psychological samples come from countries with only 12% of the world’s population”.
Food for thought, isn’t it?
Calipe Chong’s Bio and Contact Info:
A Singaporean businessman who has previously worked for US corporations for 28 years and is now providing supply chain services in Suzhou, China.
Calipe has worked and lived in China since 1997 and takes a strong interest in Western- and Asian history and culture. He helps to bridge his clients and friends with the Chinese partners to understand each other better in developing amiable and reliable relationship. Calipe has an MBA from UniSA.
Personal Profile: https://www.linkedin.com/in/calipechong
Book "Understanding China" (http://www.understandingchina.net), available on Amazon (https://www.amazon.com/dp/1973487403?ref_=pe_870760_150889320).
 Henrich, Joseph and Heine, Steven J. and Norenzayan, Ara, “The Weirdest People in the World?” (May 7, 2010). RatSWD Working Paper No. 139.
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