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«Inaugural-Dissertation zur Erlangung des Doktorgrades des Fachbereichs Wirtschaftswissenschaften der Johann-Wolfgang Goethe-Universität Frankfurt am ...»

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This increasingly contained also monetary purposes and the replacement of formerly unpaid favors for paid services. However, monetary relations lack Rénqíng, which means that instead of engaging in Guanxixue, people engage in more business-like ―cash nexus‖1036 relations to others. Increasingly money is preferred instead of receiving non-monetary gifts because it can be exchanged into something else more easily. This changes the nature of Guanxi, because ―in many cases money payment has lifted the veil of the language of friendship and made explicit the exchange of material interests‖, leaving no debt on either side.1037 Thus, from the 1990s Guanxi once again served political and economic intentions, but changed the realm of its appearance. While it faded away in some areas due to the appearance of legal institutions which replaced it, it simultaneously found "new territory to colonize".1038 All in all, those changes did not reduce the extent of usage of Guanxi. The gifteconomy yet coexisted with the new form of commodity economy, having significance for commercial transactions, because still money cannot buy everything. On the contrary, it helps to save money and to facilitate economic transactions, especially for supplies, in bypassing state institutions for e.g. getting a passport, finding job opportunities or linking up with relatives overseas.1039 Some authors1040 argue that because of the legal institutions newly introduced by the state, Guanxi is not necessary anymore. It is easy to fall into the trap of this argument, because it is often not openly admitted, especially by businessmen, that they actually engage in Guanxixue. As Guanxi is often associated with corruption and bribery especially managers would never officially claim to use Guanxi as a means of business.

The fact that Guanxi is often used for business transactions gave rise to an again new form of Guanxi that requires doing business with officials or concluding business contracts in a less formal environment, namely by enjoying nightlife. As Yang states, this is less an Gold, 1985, p. 662.

Yang, 1994, p. 166.

Yang, 1994, p. 167.

Yang, 2002, p. 463.

See for example Guthrie, 1998 and King, 1991. Guthrie (also in Guthrie, 1999) criticized Yang‘s analysis of Guanxi in her book Yang, 1994. She replied to it in a paper that was originally composed for a conference that resulted in the book Gold; Guthrie and Wank, 2008b containing an essay by Guthrie that repeats his

arguments in similar form but left out Yang‘s work. She published it in The China Quarterly soon thereafter:

Yang, 2002. However, in the same volume, Scott Wilson finds a middle way between the two opposing views. He claims that the strict differentiation between norm-based Rénqíng relations and instrumental exchanges (what Yang calls Guanxixue) might be misleading. Rénqíng connections may in the long-run also turn out useful for material gains and thus the boundary between both concepts is rather blurry as, for that matter, for him is the boundary between urban and rural Guanxi. Wilson, 2008, p. 177.

exchanging of gifts but rather, and I would like to quote her literally on this: "No longer are gifts or banquets sufficient in these new Guanxi rituals, but a long night sharing the pleasures of masculine heterosexuality and giving women's bodies and sexual services as gifts will cement Guanxi better."1041 Thus, strengthening Guanxi through masculine bonding brings Chinese business culture closer to that of other Asian countries and emphasizes the practice of Guanxi as a more male instrument (see also below, chapter 6.3).

To sum up, there are mainly two institutional changes to the Chinese economy: the introduction of a legal-rational regime by the state and the "increasing class and gendered nature or Guanxi".1042 Thus, this again is a proof that ahistorical Chinese values do not exist. Rather, Guanxi is "a historically evolved regime of kinship and ethnic power" that today "traps women and the poor while benefiting fraternal business associations".1043 It is formed during the process of change of the economic system in the Chinese society. Although for example Rénqíng is based on traditional Confucian values, the extent of its usage among business managers cannot be estimated. Thus, beside Guanxi there are also typical Capitalistic features such as profit-seeking or exploitation of workers to be found.1044 As also already mentioned before, Guanxi is a way to bypass bureaucratic obstacles "by redistributing what the state apparatus had distributed according to very different principles of personal relations rather than political evaluations".1045 Guanxi exchanges institutionalized dominance with personalized power of people. The need to constantly cultivate and maintain connections therefore seems to fit to an environment where power-relations are not (yet) stable. Additionally, institutions, for example for acquiring academic degrees or property, may still be subject to change. Often, personal networks survive, even if family firms change their business or seize to exist. In those circumstances it is still rational to use Guanxi, although it may be time-consuming and costly. Yet, this does not imply that once rational-legal institutions are established, Guanxi as more irrational mode of economic activity will fade away. Rather, it will coexist in a newly defined institutional and cultural style of modernity.

Yang, 2002, p. 466.

Yang, 2002, p. 466.

Ong, 1999, p. 116f.

Yang, 2002, p. 466ff.

Yang, 2002, p. 469.

6.1.4. Modern type Guanxi: the urban art of Guanxi and business practice

–  –  –

Especially in urban China the exchange of gifts has mostly instrumental reasons. Within China many people consider this type of Guanxi as an antisocial behavior purely for ones‘ own self-interest and because of this, particularism is morally rejected. Particularly when dealing with bureaucracy, it can be difficult to differentiate Guanxi from corruption. This issue will be discussed in detail below.1047 Nevertheless, also the instrumental side of Guanxi can have moral aspects and serves as a social function. It therefore not only has an instrumental, manipulative side of mutual exchange, but entails also the notion of emotional feeling for the acquaintance. Additionally, it reveals a resistance to and a mistrust of formal organizations in sidestepping official ways of, for example, obtaining employment or loans.

The range of occasions to use Guanxi in cities covers many aspects of everyday urban life, such as housing, facilitating transportation or better education. One other important end for Guanxi is to obtain supplies, which again was especially essential during the Cultural Revolution, when the production of consumer goods was low. It was also important to get rare or high quality products, such as a certain brand of bicycles. Another important area was employment. Personal relations were needed to get a job, to change a job or to be promoted.

As was mentioned before, also moving geographically was much easier if one knew the right people because due to the 'household registration' moving was very restricted. To change the place of registration was a long process of bureaucracy, intensified when migration from the countryside increased after the economic reform in 1978. With Guanxi, also getting better health-care could be ensured and changing to a certain hospital or doctor was made possible. Doctors are particularly important people with whom developing personal relationships is especially important due to their role in the system of state-medicine.1048 The range of Guanxi relationships in urban areas had and has more categories than in rural areas, entrance and exit to networks are flexible. Not only family and kinship are of Kiong and Kee, 1998, p. 86.

Yang, 1994, p. 52 + 63.

Whyte, 1995, p. 1011 and Yang, 1994, p. 91ff.

importance, but also relations to neighbors and other native-place ties and non-kin connections of equivalent status such as superior-subordinate relations. Especially the kin-like relationships that are maintained with neighbors have the purpose of substituting missing family which might still live in the countryside. Neighbors are close in a spatial sense and share the same experiences. This is even more the case if people stem from the same region or speak the same dialect. Another important part of personal urban networks are (former) classmates, but of course also teachers or bosses, which can result in a lifetime relationship. Non-kin-relationships, such as people from the military or university, became more important in urban areas, creating fictitious or quasi-kin-relationships. Family metaphors, such as the usage of kin-related vocabulary such as ‗dìdi‘ (弟弟, younger brother) or ‗bóbo‘ (伯伯, fathers elder brother) served the purpose to bring people from outside the family into an inner circle.1049 Apart from the more social aspects of urban life, Guanxi is obviously of importance to business relations.1050 This means, that the very idea of kinship of loyalty and trust is carried over as principles of urban (business) relations, which are seen as less ―confining‖ and ―more enabling‖.1051 Those people are seen as family-like and thus can be trusted because long-term relationships exist. With them it is possible to found enterprises, exchange information and share resources. Thus, only the more positive aspects are taken over from traditional, rural Guanxi, leaving out the rigid hierarchy aspect.

In urban environments where the state is very dominant, Guanxixue is mostly used to cut through boundaries given by administration.1052 The networks created with non-kin are the seed from which private entrepreneurship stems.1053 If two enterprises want to cooperate, it has to happen on the base of Gănqíng. In other words, the network will only work if personal trust exists, especially between the two managers of the firms. They need to find a person they trust, which means nothing else that long-term relationships have to be established. Thus, the core group, even of larger enterprises, often still consists of family members or good friends.1054 After the economic reforms there had been increasing exchange between rural (family) and urban enterprises, due to the bigger networks of personal relationships outside the family, especially of the latter. Also, there are exchanges between companies of overseas ChiWhyte, 1996, p. 12.

Yang, 1994, p. 112.

Yang, 1994, p. 113f.

Krug, 2002b, p. 139.

Krug, 2002b, p. 139f.

Kao, 1982, p. 68.

nese and firms in mainland China that take on the form of Foreign Direct Investment (FDI), but which is nevertheless based on Guanxi. The establishment of capitalistic enterprises within a socialist system raises a wide range of problems. Many entrepreneurs utilize social ties especially to Chinese relatives in mainland China who might be able to facilitate and speed up the negotiations of investment. The same is often done in customer negotiations. It is easier to do business with a certain person if a Guanxi relation has been established. Also, customers prefer to do business with whom old relations exist on which this new connection can be based on.1055 Increasingly, also Western companies under nonChinese leadership engage in Guanxi to facilitate business. During the last year, dozens of studies and surveys in business and marketing journals1056 were published ―to help business practitioners in China, especially those from the Western countries, to gain a deeper and more practical insight into the Chinese social network, and to help them make effective cross-cultural adaptation and business decisions in the unfamiliar cultural environment of China‖.1057 This strategy relies mainly on social factors without the involvement of legal contracts, especially when acquiring new customers and business partners. This process involves dinner banquets and gifts, for example cigarettes or alcohol. In contrast to the often difficult negotiations common in joint venture investments, involving Chinese state enterprises and foreign companies, investments based on Guanxi are established much faster.1058 Gift exchange serves the logic of a Capitalism just emerging within a socialist society, which still has gaps in its legal system and lacks the institutions which enable it to establish enterprises in a rational, exact procedure. Guanxi can thus be regarded as a substitute for formal institutions.1059 Those market ‗imperfections‘ favor business connections among smaller groups of people over more complex organizational structures. Under the conYang, 1999, p. 104f.

For example Wang Qian, 2007, Wong; Leung; Hung and Ngai, 2007 and Balfour, 2007. Balfour states:

―as any China veteran will tell you, it is the key to everything: securing a business license, landing a distribution deal, even finding that coveted colonial villa in Shanghai. Fortunes have been made and lost based on whether the seeker has good or bad guanxi, and in most cases a positive outcome has meant knowing the right government official, a relationship nurtured over epic banquets and gallons of XO brandy […] Cracking the guanxi code still takes hard work and perseverance. […] What's more, Chinese businesspeople are more experienced and globally savvy than they were just a few years ago. They're looking for business connections who can help them expand outside China or get their company listed on a foreign exchange. ‗People want something more professional and strategic from their relationships,‘ says Li Yifei, Viacom 's chief representative in China. ‗They want to know how good your guanxi is back home‘".

Ai, 2006, p. 105 and similarly in Siu and Bao, 2008, p. 80.

Granovetter, 1985, p. 490.

See the recent study: Dunning, 2007.

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