1 | P a g e Subject Code: IBUS30004 Subject Name: Chinese Business and Economy Student ID Number: 540758 Student Name: Denny Vuong Tutorial Day/Time: Wednesday 2:15pm Tutor Name: Shea Fan Assignment Name or Number: Assignment 3 Topic 3: Guanxi and corruption “Is guanxi corruption?” Critically discuss the statement . – What is guanxi (network)? The importance and relevance of guanxi for doing business in China. (20%) – What is corruption? Is corruption a necessary product of doing business in China. (20%) – Discuss the debate - “Is guanxi corruption?” (60%)
2 | P a g e Introduction Prior to China's economic reform and trade liberalization, their economic performance was extremely poor; centrally-controlled, very inefficient and isolated from the global economy. Since the implementation of free market reforms in 1979, China has become one of the world's fastest growing economies with annual GDP growth averaging up to 9.6% in recent years. China has also become the world's second largest economy and second largest destination of foreign direct investment (Morrison, 2013). Guanxi has played a major role in China's economic success where guanxi-practice has developed into a common business method within china (Zhu & Hong, 2008). Many argue that China's abnormal economic growth rate is due to corruption through the use of guanxi (Changzheng, 2010). This paper will provide an in-depth analysis on the relationship between guanxi, corruption and business in China. In the sections that follow, (1) an overview of guanxi will be discussed, (2) an overview of what corruption is, how it has affected China's economy, and (3) what is the relationship between guanxi and corruption. What is guanxi? Guanxi is one of the most powerful forces in Chinese culture (Chen & Chen, 2004). It refers to the establishment of a relationship between two independent parties which allows an exchange of benefits (Yeung & Tung 1996). The two Chinese characters ( 关系 ) which make up the word guanxi means "gate/pass" or "to connect", while its direction translation to English is: relationships or connections. The concept of guanxi is very complex and dynamic, and can be defined at different levels from different perspectives (Chen & Chen, 2004). For the purpose of this paper, guanxi will be defined as an informal, long-term personal relationship/connection between two individuals or parties where both parties are able to benefit from one another. Depending on the depth of the relationship, for example, when one party requires assistance, the other will be quick in helping or acting on one's behalf, as the
3 | P a g e consistent exchange of favours will benefit both parties and allow a long-term relationship. These benefits bring equilibrium to the relationship and may include: services such as completing a favour, products - expensive gifts, money or the ability to surpass legal barriers.
- Economy of the People's Republic of China, guanxi