Guanxi Or The Unwritten Law Of Chinese Society Economics Essay

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GuanXi is a cultural phenomenon that is the subject of various descriptions "tight close-knit network", "interpersonal connections" or "door or passage" (Dunfee and Warren, 2001). While some liken it to bribe or Russian blat, however, it is an informal institution typically Chinese. It cannot be reduced to the existence of networks (2.1), it is also the bearer of values and beliefs specific legacy of Confucianism (2.2)

2.1.2. The principles of GuanXi

Six principles animate the dynamics of GuanXi (Luo, 2007). GuanXi is transferable. If A has GuanXi with B and B with C develops GuanXi then through B, A (C) may come into contact with C (A). Linking depends on the quality of GuanXi between A and B but not based on an emotional connection. While a friendly relationship based on affection, it is not a prerequisite for establishing a GuanXi especially in the business world. GuanXi is reciprocal in the sense that it requires the exchange of favors. If A has GuanXi with which B does not respect the rule of reciprocity by making a favor for a favor, he will lose face (mianzi) and trust B. If A and B do not have the same social status, favors exchanged are not of equal importance. GuanXi is intangible as if sharing a GuanXi A with B, he was hired by a code of reciprocity and fairness unwritten and invisible to B. The exchange of favors is unlimited in time by a tacit agreement between A and B. Not fulfill its commitment breeze informal GuanXi carries a serious injury to his reputation and result in loss of prestige and face. In other words, a person who helps another will be very important for it to always keep in mind what she needs. This principle induces obligations and responsibilities. GuanXi is utilitarian (more than sentimental). Except within the family GuanXi, GuanXi relationship that is not based on mutual or not provide an advantage in the medium or long term would not be viable. For this reason, individuals with GuanXi extend the corporate world. Employees can benefit from promotion, salary increases or other benefits by transferring their personal GuanXi business. GuanXi is contextual in the sense that cultivate GuanXi is in a particular context. Make a gift to his boss does not have the same meaning when it comes to having a child (gift-giving culture) and when it comes to a promotion. The practice of GuanXi is an art as well (GuanXi xue). GuanXi is always established in a long-term perspective. GuanXi relationship is experienced as an asset that can be put to sleep during periods of absences difficulties and reactivated at critical moments. In fact some of GuanXi relationships never end and are transmitted from generation to generation. Finally GuanXi is personal. That established between organizations is originally based on interpersonal relationships and develops from these relationships. When a person causing a multi GuanXi leaves the firm, the organization loses GuanXi. GuanXi is thus distinguished from inter-organizational networks in the West. The relationships between individuals can certainly facilitate cooperation among enterprises, but they are not a necessary condition for the development of interfirm networks in the West.

2.2 The origins of GuanXi and its reemergence

With the passage to the economy of market, GuanXi who finds its foundations in moral philosophy Confucian of "man of good" (junzi) was mobilized for productive purposes in the business world.

2.2.1 The roots Confucian

The means of develop relationships varies according cultures and systems beliefs. To understand the GuanXi, we must remember the legacy of Confucius (Kong fuzi, 551-479 Av J.-C.). Since the dynasty Han14, Confucianism took an important position in Chinese society and well of Confucian values remain today deeply rooted in mentalities chinoises15. Of the three major Chinese traditions (Confucianism, Buddhism and Taoism), as choice of the imperial ideology and guarantor of the social cohesion, it has completed and still fulfills a function more ethical than religious. "(...) Confucianism is no longer only a philosophy, but an inseparable part of what it means be Chinese and a large share of what the social being Chinese. It is behavior, mode of being, with which the inner pole of the religion does not interfere. Religion is personal matter, and we does not cease social practice Confucian for reason of Buddhism "(Deverge, 1987, p. 1) The thought of Confucius is a wisdom and the doctrine is characterized by its moral requirement. We owe to Confucius the concept of humanity (ren). Make proof of this virtue, that is love others and the others are me because I am them. The thought of Confucius is also political. She does conceives a strong state but virtuous. She encourages the values of harmony and respect for the promotion of a life orderly social. The harmony (ET) with oneself, with others and with nature wants that we favors the whole rather than the parties, the everything each of which depends and which each contributes. Ago thus interaction (ganying) between beings, and people are first of nodes in the network multiple and changing relations (Mathieu, 2006).

In Chinese thought, the person as such does not exist. It exists only in the first group and in the family which is the reference group. More, the vision Chinese policy is inegalitarian because each group is hierarchical. The power, age, sex, knowledge, virtue are all elements which fix the rank in the hierarchy. The group must practice the path du juste milieu (zhong yong) or social harmony which can be a appearance obtained from the non confrontation between people. Chinese thought favors the relational nature of different elements of world, including therefore human beings. Thus an individual is first and foremost a relational being part of a community. The GuanXi translated therefore this vision of man inserted into a canvas of relationships. Its modus operandi is influenced by harmony and the hierarchy own to Confucian teaching (Dunning and Kim, 2007). People are dependent on each other and strongly encased in a social environment (collectivist society or Community within the meaning of Hofstede, 2002). The Confucian ethics insists by elsewhere on the respect of the hierarchy (society of distance hiérarchique16 within the meaning of Hofstede, 2002) and, in this hierarchy, exist both of affect and of interest. This last engenders duties of reciprocity. This is the son who is indebted towards his parents (filial piety) or still the subject which must fidelity to his Prince. But, in same time, the sovereign must his subjects to put his power in service of all, at the risk of be overthrown. In such a collectivist society, the person must put the interests of the community before his own for the sake of order and harmony for the well-being of all. GuanXi is thus the translation of this association of persons working for the general welfare in a world of empathy. The importance of face and reputation is due to the awareness of the Chinese community and cooperative role that it expected of them.

While in the West the individual is an autonomous entity before God in Confucian China, the person is the center of a network of relationships. It is only by others and the primacy of the community especially assigned duties. "The community in China is a place of identification of the individual, its security and its defense against outside groups, but especially the definition of their duties" (Sanjuan, 2002, p. 126).

Unlike the West, the Chinese continued to stand in relationships and always defines a person in a relational context. For him, there are insiders and outsiders, that is to say people who have GuanXi (Shouren) and those who did not (shengren). Treat it first with generosity, care and recognize their prestige or power. He will not see any lasting relationship with seconds (Hsu, 2004). Confucianism has indeed given a place within relationships and he knows his place to play its part. Five cardinal relationships (wu lun) are the basis of human relationships (father-son, ruler-minister, husband-wife, elder brother-younger brother, friend-friend) and lower owes obedience and respect to higher education. These relationships are based on additional obligations and mutual trust. Very often in the GuanXi, the two people are not on the same level or even social environment. Obligations of reciprocity reflect differences in status even though the relationship remains a give and take relationship.

GuanXi which one could imagine the extinction due to its distant origins actually found a news during the transition to the market economy.

3. Governance informal versus formal governance

GuanXi now replaces faulty certain rules of formal institutional architecture integrating both constraints (3.1) and productive incentives (3.2). In other words, the Chinese economic dynamism based on informal governance supplementing the formal governance that is taking place in an "incremental".

3.1 The informal constraints

GuanXi networks are a form of social capital that produces a type of trust necessary for the coordination of activities.

3.1.1 The capital GuanXi

Speaking of social capital is to evoke publications Bourdieu (1980), Coleman (1994), Fukuyama (1997) and Putnam (2000) 18 mainly. For the latter, professional ties, associations, family and others create social capital that is characterized by trust and generalized reciprocity making the company more efficient. For several years, the OECD provided many of his works devoted to capital and thus the recognition of the concept that will result in multiple searches (2001, 2009).

According to the OECD definition, "social capital, which covers various aspects of social life - networks, norms and relationships - is what allows people to work together, create synergies and build partnerships. (It) is the glue that binds communities, organizations, businesses and various social and ethnic groups. " It concerns "networks and norms, values ​​and understandings that facilitate cooperation within or among groups" (OECD, 2009, p. 57).

GuanXi is a form of social capital. It is indeed a "stock" of relations at a given time and a Chinese investing in relational capital, as it is possible to invest in capital or technical human capital. Chinese culture that values ​​and GuanXi expression of solidarity, leads individuals to integrate different GuanXi and to increase their spheres of belonging. Whereas in the West, one wonders how the state can build social capital that is recognized therefore its impact on welfare and growth in China, cultural values ​​grow "naturally" the Chinese to build and develop links. This informal institution has been spontaneously mobilized by the Chinese during the transition to the market economy and, consequently, the strength of formal institutions at the outset was less essential for human interactions grow successfully.

GuanXi respects the characteristics that Coleman (1994) gives the capital. It is a resource because it facilitates individual actions (find credit, a job, a customer ...). Because it is productive to develop or reactivate a GuanXi is the most likely way to reach a goal. It is a public good in the sense that it is not the exclusive property of the members who exploits. While human capital resides in the individual, social capital resides in the relationships of the individual with others. However, it can also be analyzed as well as private or not the person has one or more GuanXi that produce positive externalities (reciprocity, trust ...) (Fukuyama, 2002). GuanXi is also sometimes called "currency GuanXi." But, ultimately, as the currency is only useful because other agents use, GuanXi is a "currency" used because the Chinese as a whole recognize his practice thus giving the characteristic a "good" group. GuanXi also includes three aspects Coleman (1994) attributes the capital. The first consists of obligations and expectations in a context of generalized trust. This is to help someone who has given you a favor, but also not harm the one who helped you. The second aspect relates to the flow of information available to the partners of GuanXi. Members provide each other information even if it is not the primary motivation for the relationship. Finally, the third aspect is the existence of norms and sanctions that deter opportunistic behavior, such as the diamond market in New York analyzed by Coleman (1994). In all these aspects, GuanXi is an informal institution producing trust arouses people optimistic expectations about the behavior of others.

incentives implicit GuanXi and its complement RenQing

1.1.3 The institutional path dependence

For neo-institutionalists, institutions and past experiences strongly influence the institutional matrix of a country at a given time. There is a "path dependence" 6 because on the one hand, organizations born of the existing institutional structure will always endeavor to reject changes that may affect their well-being and, on the other hand, the system of beliefs the origin of the structure to oppose drastic changes. Institutional path cannot be changed abruptly, it will not be that way "incremental."

Once a development path follows a particular path, the process of learning organizations strengthens the trip. If there are incentives (disincentives) for productive activity, they will strengthen. There would be a sort of cumulative process of enrichment (depletion). The adoption of an effective institution (inefficient) leads to increasing returns: the more it is used, the more other people find it convenient to comply. Thus are explained the difficulties of some countries out of poverty through adequate institutional change (North, 2005).

The radical changes in formal rules is always possible. But their application by individuals and the development of standards to complement these can take a long time because of informal institutions that influence the intentionality of individuals, their understanding of the problems and their worldview. As written by North (2005, p. 210) relevance, "(...) there is no set formula for achieving economic development. (...) Although the sources of productivity growth are well known, the process of economic growth vary in every society, reflecting the diversity of the cultural heritage and, not least, geographical contexts, physical and economic. '

1.1.4 The cultural dimension of the institutional matrix

"There is an intimate relationship between belief systems and institutional framework (...). Belief systems are (...) an internal representation and institutions the external manifestation of it. "(North, 2005, p. 75). For example, what is the formal rules of economics, the market structure will reflect the beliefs of those who are in a position to dictate the rules of the game More generally, in any society, dominant values ​​may be those "entrepreneurs" in the economic and political orders will establish lines of action and result in an institutional matrix determines the functioning of the economy and politics.

Formal institutions are stabilized by the use and recognized as legitimate within a given culture. They allow individuals to act in a manner understood and accepted by others and require other lines accepted by common rules.

"The ideas too far standards embedded in our culture can not easily be incorporated into it. Are adopted ideas that contain a type of cohesion as they are not too far standards that are ours. We see, we remember and we understand by combining shapes (pattern matching). This is the key to our ability to generalize and use analogies. This makes us very able not only to model "reality" but also to construct theories against the real uncertainty. "(North, 2005, p. 48).

It exists in every society that North (1981) calls the "ideology", that is to say, a system of norms or moral beliefs shared. Individuals have limited cognitive capacity and procedural rationality. To explain the world, they construct mental models. Learning is different from one company to another, they interpret differently the environment. Thus rational behavior qualified in a culture can be judged irrational in another.

More fundamentally, it is always possible to say that the formal institutions will be met if agents are advantageous to do (North, 1981) or that it is those who hold power in society impose this or that rule in their interest ( North, 1990b), but ultimately the belief system will always oppose radical changes to the questioning.

This means that "good" institutions are essential to economic development, but they can take different forms due to differences in beliefs. "There lived in different societal time will perceive differently the way the world works, it will be different institutions to provide incentives identical" (North, 2005, p. 97).

If institutions are universal functions (reduce transaction costs, reduce uncertainty in economic relations, overcome information asymmetry ...), their forms may differ from one country to another (Rodrik, 2008) . Formal institutions have a dimension of shared beliefs crystallized in the "ideologies". Accordingly, the creation or reform of formal institutions in a country can not meet a single order (Jameson, 2006). As a corollary, the institutions are not transferable from one country to another. Finally, the impulse to development institutions are not necessarily entirely based on formal rules. While some formal and informal institutions are complementary, others may be substitutable (Williamson, 2009).

Empirical studies show a correlation between cultural values ​​and institutions (Guiso et al., 2006; Tabellini, 2008) but also between formal and informal institutions. For example, countries in which the authorities have imposed formal rules without regard to informal institutions have not experienced development (Williamson, 2009).

The Company and its western face model to Chinese culture business

The meeting Western standards and Chinese institutions

1.2 Standards Western and Chinese institutions

In the neo-institutional literature obedience Northian are highlighted economic institutions of first order can not ignore a developed nation. Without compromising the economic takeoff, reforms in China have not so far focused on them.

1.2.1 The economic institutions of first order

Efficient markets and economic dynamics based on the fundamental institutions such as the right of property and contract law (Furubotn and Richter, 2003). It is up to political institutions to ensure compliance with the rules of law for the smooth operation of the spheres of production and trade.

Quality propriété7 private law determines the ability of agents to accumulate and generate wealth. Specifically, an efficient system of property rights reduces uncertainty and encourages agents to participate in competition and ensure return on investment. With ill-defined rights, individuals have no incentive to invest in the long term. Finally, the right of property requires a contractual right to consider market transactions. Two main reasons for these institutions. On the one hand, the scarcity necessitates the creation of property rights to prevent violence and survival of the fittest. On the other hand, market failures such as externalities, such as production require the allocation of property rights to internalize. Uncertainty, imperfect information and bounded rationality of individuals are sources of failure that can transcend institutions (Borner et al., 2003).

It should be noted that these first-class institutions are part of a culture that has cardinal individual and individualism which arise equality and freedom (democracy). Consequently, the right to private property has the status of a fundamental right and inviolable (natural law). In the Anglo-Saxon world in particular, the individual who is the owner refers (free man). It is free to negotiate and is guaranteed to see the judge to ensure compliance with contracts.

These are property rights and contract law firm and stable were the key to the economic success of the West. The private contractor is encouraged to invest and innovate because it has control over the return on assets that have been produced and improved by him.

In the Western tradition, the market is efficient if the contracts are complete (rights and duties of the contracting parties explicitly specified). Propriétariste in a society, the rule of law validating contracts and rules of justice arbitrating disputes can reduce transaction costs.

The Chinese market economy rests she now on such institutions?

1.2.2 Institutional reforms unfinished Chinese

Econometric studies showing a positive correlation between institutional quality and economic growth rates and investment define institutional quality from secure property rights, contracts sufficiently protected and contractual obligations met (Borner et al., 2003 ). According to an OECD study, for the 1980s, the United States has the highest average efficiency of economic institutions (4.19) while China gets a poor result (2.8) (Borner and al., 2003, p. 46 et seq.) 8

China's economic development is now part of an institutional building still relatively far from that suggested by the proponents of "good governance" inspired by the neo-institutionalism. However, as noted by Rodrik (2003, p. 9), "First, China has relied on institutions unusual, non-standard. Second, these institutions unorthodox work precisely because they produce results Orthodox, ie market-oriented incentives, property rights, macroeconomic stability etc.. Third, it is difficult to say, in view of the tremendous growth of China, a set of "best practices" institutional arrangements would necessarily have done better. "

Three periods marked China's reforms since the policy of "reform and opening" of 1978: 1978-1992 is a transition period post-Maoist which raises the question of the specificity of the Chinese way wanting to combine economy and communism market 1992-2001 was a period of rebuilding summarized by the term "socialist market economy" in 2002 included China as a part of globalization (Sanjuan, 2007). The new rules of the institutional game were initiated by the State (Party) has chosen to release market mechanisms gradually. An orderly and gradual approach was indeed successful. Experimentation and pragmatism dominated because, according to Deng Xiaoping, it was "cross the ford groping from stone to stone." The principle of "trial and error" adopted is to recognize that the way out of "path dependence" and embark on one of modernity, the new rules should be introduced gradually and experienced by the actors. Institutional change is necessarily "incremental" not to suffer the hostility of existing organizations but to collect their membership (North, 2005).

Reforms begun in 1978 in the agricultural sector continued in the secondary sector in 1984 and more recently in the service sector. As noted by Maddison (2007, p. 74), "Although there was no official return to the capitalist system of property rights through privatization of public goods, capitalists have become members of the Communist Party, farmers have found a wide discretion in the management of their lands, the number of Chinese homeowners increases rapidly and opportunities for personal enrichment through private initiative and private quasi multiply. "

What is more specifically fundamental economic institutions?

The property has never been in China the foundation of absolute individual right and she was in the West. As if, since 1978, reforms reshaping property rights, "China continues to develop its own model in which property rights are more important than the right to property and where private and public properties interact in an original way" (Quinio et al ., 2009, p. 8).

Regarding the land, both in urban areas than in rural areas, real rights (wuquanfa) were reformed several times without ever questioning the system property (suoyouzhi), that is to say State property or collective property. Farmers for example have the right to user9 today and enjoy the earth, and to transfer their right to use. This means that individual rights are recognized but "they can not be truly realized only through the systems of collective ownership and state, not the private property '" (Quinio et al., 2009, p . 9). And the holder of a right of use can not change the use of land without the consent of the public authorities.

The revision of the Chinese Constitution (2004) introduced the concept of private property (siyoucaichanquan) in Chinese law and grant him status almost equal to that of collective ownership and state ownership. The level of protection is the same but the scope is reduced, the land being excluded. For these reasons, much work neo-institutionalists believe that the ownership remains unclear in China, and the public-private boundary is not always clear. For example, for companies, the land is allocated by local governments and capital from private sources. Incentives recognized the right of property in and find limited.

Regarding contractual rights, it must be remembered that if, in the West, the contract is the center of social relations, this is not the case in the Eastern tradition. But again, the Chinese civil law which remains embryonic experienced in recent years many advances.

New Contracts Act was adopted in May 199910 to apply to both nationals and foreigners, individuals as legal persons. But the principle of freedom of contract has not been explicitly incorporated into the law. "This does not mean that the Chinese contract law does not recognize the freedom of individuals to contract. This freedom is not unrestricted "(Kornet, 2010, p. 10). For example, a company may be appointed by the State to buy another or some particular contracts involving foreign technology and the exploitation of certain resources are subject to approval. "The examination of other provisions of the Act shows that the Chinese contract law gives priority to the collective interest over individual rights and interests of the contracting parties" (Kornet, 2010, p. 21).

Formal institutions in China have they reached their optimality? Interested in the regulatory environment for business operations, the Doing Business 2010 report of the World Bank and IFC ranks China 89th place (183 countries) for economies where it is easier to make affaires.11 formal institutional matrix does not evoke a "good governance".

How then can we explain the economic performance of this country? China contains incentives for economic development that are not fully given by its formal rules. Specific informal institutions, namely the GuanXi that promote economic dynamism.

2.1.3 The relational logics

The links between the Chinese can be sentimental, commercial or mixed (Hwang 1987, Wong et al., 2007). Emotional ties are generally relatively permanent and stable concern members of the same family, relatives and close friends. In this context, the principle of justice prevailing admits the first allocation of resources according to the needs of the individual and not from his contribution. By cons, relationships utilities that serve only a specific objective and are much more unstable, maintain a principle of justice that the individual contribution is essential. Finally, combining mixed feeling and links are useful to meet people who operate the favor and face to influence others and achieve their goals. It also amounts to distinguish between links on a person of attachment (bonding) as part of his family or his tribe, links acquaintance (bridging) with friends or work colleagues and contact links (linking) on ​​broader social relations in order to increase his power or wealth (Woolcock, 1998). The more a person away from his family circle and intimate, the more utilitarian or instrumental GuanXi will.

The main dimensions of relationships based on affect are the face (lian or mianzi12), the exchange of favors (gift-giving) and the fluidity or flexibility. The face is a way to get the esteem and respect for others (Hwang, 1997-8). In Chinese culture, it is to save face by developing GuanXi benefits that are expected or will know people with high social status. Face refers to respect, status, reputation and moral image refer others. In other words, the face is a sign of recognition by others of his own moral value. "The face is the mechanism that punishes an individual the result of learning basic codes of social ethics in China. "(Lautard, 1997, p. 126). Everyone wants to through GuanXi to acquire symbolic capital and develop because the face can be lost, data, or challenged saved. Give the face a person, it is the value in the eyes of the group and forced to return the favor sooner or later. Honoring its commitments, each a credible reputation increases (Kexin) and capital trust (xinren), and thus gains some form of power. Mianzi therefore makes the individuals responsible and honest, because in Chinese tradition, losing face is comparable to physical mutilation. The Chinese must therefore make a favor for a favor received. It may be intangible (affection, advice, information, consultation, ...) or tangible (gift, banquet, work, apartment ...) and depends on the personal relationship. Within the family, favors are exchanged such feelings but love, affection, support (qinqing) with close friends, they are part of the friendly service make (qanging) and extended with the knowledge, are equivalent to IOUs informal (Renqing). Theoretically, the standard credibility to the GuanXi is that it gives more than it received because it allows to save face and continue the relationship, the other remaining "debt." In addition, a GuanXi partners enjoy greater flexibility and ease because of "favoritism" that is, for example, to grant a discount under a trade in anticipation of such a favor will be returned soon or later. This contributes to greater fluidity in the business organization (Wong and Chan, 1999).

The main dimensions of relationships based on interest stricto sensu are cooperation and the norm of reciprocity (bao). In order for a relationship or GuanXi quality partners must have experienced the reciprocity of obligation and obtained satisfaction. It must therefore be evident mutual desire to maintain a relationship over the long term. This requires valuing the efforts and resources devoted to the maintenance of cooperation. The obligation of the parties is an implicit or explicit commitment to continue the relationship that shows the willingness to make short-term sacrifices to achieve long-term profits. If GuanXi is strong, favors are not necessarily to make short term. He even admitted as in relationships based on feelings, that we hold in reserve to receive favors to keep the partner accountable. Keep the other "debt" vis-à-vis itself can be a strategy to have a stock term relationships indebted (Wong et al., 2007).

2.2.2 GuanXi in the business world

In the past, the relationship mechanism was part especially in the context of family GuanXi. With the modernization that has led to the geographical dispersion of the family clan (relocation of populations) and urbanization but also by the development of trade "free" GuanXi business took precedence over family GuanXi. GuanXi "cultivated" outperformed GuanXi "inherited".

During the Maoist period of widespread shortages, households busily their GuanXi them because they were primarily used to purchase goods and services. With the transition to the market economy, the use of GuanXi is passed from consumers to producers. Consumer no longer has the character of shortage, it is in the world of business GuanXi and its use are developed mainly because of the "shortage" of safe rules and certain productive resources.

Today terms like "cultivate good GuanXi", "through the back door" or "practice the art of GuanXi" (GuanXi xue) show a tendency to use his connections in instrumental perspective. GuanXi is mainly used to gather information, facilitate transactions, get a job, a loan or a fruitful business partnership or to promote the company and its products. Managers of Western companies wishing to enter the Chinese market and expatriates global firms know the importance of GuanXi strategy (Ares, 2008; Gao, 2008).

With economic reform, small businesses are highly developed and now represent 70% of Chinese GDP. Many attribute this to the expansion of their owners GuanXi and GuanXi including B2G. To engage in entrepreneurial activity, many Chinese have used their relationships to obtain the agreement of the local authorities or to satisfy the offices of land and resources. GuanXi has helped small businesses (family) to survive by raising capital and negotiating with bureaucrats. Small employers (getihu) have passed formal rules and unstabilized still poorly understood. Rather than resorting to the rule of law still abstract for most of them, they preferred to use informal rules rooted in habits.

If GuanXi is a matter of people, most large companies these personal relationships are transformed into competitive advantage (Luo, 2007). They have become an asset to private companies if their employees are willing to use their GuanXi to achieve organizational goals. The greater the number of connections to the members of a firm, the more reputation it will be high (Standifird, 2006). The entrepreneur encourages its staff to develop all kinds of good GuanXi, both internally and externally, and use their relationships to the organization. The company that GuanXi better than its competitors can then conduct business operations more profitable to obtain scarce resources, the approval of local authorities or information on government policies. Even if its products are not competitive sales force GuanXi networks obtained warrants its profits. In other words, having and maintaining GuanXi quality play as a barrier to entry and protect competition to promote the company and its products (Fan, 2007).

During the first decades of economic reforms, the status of a company or its reputation was not obtained from the market (consumers vote) but recognition officielle17. Enable the quantity and quality of connections was therefore the surest way to develop his business (Fan, 2007).

The development of GuanXi in the business world shows that while certain forms of governance can be fully supported by formal mechanisms (law in the formal governance), others may be by informal constraints (GuanXi in informal governance)

3.1.2 GuanXi producer confidence

GuanXi is a producer of trust (xinyong) in a particularly risky and unknown that the transition from a planned economy to a market economy, although gradual, is recent.

According to some empirical studies, interpersonal trust (proxy variable capital) is a factor of economic growth (Knack and Keefer, 1997; Zak and Knack, 2001; Tabellini, 2010). For studies incorporating the institutional dimension, the dimension of trust capital account mainly to promote investment rates and economic growth when formal institutions are failing. It ceases to have significant positive effects when formal rules are solid. For example, to Ahlerup, Olsson and Yanagisawa (2009), social capital (trust dimension) would increase the growth rate by 1.8 points in Nigeria but only 0.3 points in Canada19.

Studies show that even in the context of quality of formal institutions in countries where there is greater confidence expressed by individuals, economic growth is favored (Dincer and Uslaner, 2010). This suggests that informal institutions (GuanXi capital) and formal institutions (property rights and contract) tend towards optimality when trust accompanies individual actions. But what confidence is it?

Whatever society, trust is a croyance20 that allows a player to raise doubts about the intentions and behavior of other agents in a situation of uncertainty and ensures their cooperation. But it may take different forms. While Western confidence is expressed especially vis-à-vis institutions, trust is primarily a Chinese interpersonal trust, specifically in the context of GuanXi. The first requires the existence of stable institutions and well defined (institutional quality or governance), the second is based on repeated experience within relationships. In the case of institutional trust which guarantees the behavior of individuals, trust, it is anticipated that the other act as specified by formal rules or when he will be punished for breaches under the rules. With relational trust based on the quality of past exchanges, trust is one that will provide according to his speech as he has done or will be sanctioned by the community 's it does not meet its commitments.

Interpersonal trust also has two dimensions: one comes from the heart, the other reason (Chua and Morris, 2006). The psychology of confidence differs indeed a confidence based on a emotional (affective) and a confidence based on an instrumental (rational). In other words, individuals can have confidence in each other because they are concerned about the well-being of others, convinced of the value of their relationships and believe that they have mixed feelings (affective trust). They can also have confidence in others because they feel from a rational calculation that they are competent and reliable (cognitive trust). These two dimensions of trust are not independent and are present in every manifestation of trust. However, the Chinese cultural values ​​enhancing the community as opposed to Western values-oriented individual to lead GuanXi in which the trust is an important emotional alongside cognitive trust. Against Westerners are more likely to focus on the competence and ability of people to trust them.

3.2 The implicit incentives of GuanXi

GuanXi promotes Chinese economic dynamics of the game by reducing transaction costs and making some less essential formal rules.

3.2.1 Reduction of uncertainty and transaction costs

Ensuring expectations and obligations of individuals, norms and effective sanctions but also by promoting the dissemination and circulation of information, GuanXi reduces transaction costs, that is to say, all costs incurred through coordination among economic actors (Coase, 1937; Williamson, 1985).

Costs ex ante market are mainly a problem of information. Find information on the prices of goods and services and factors of quality or potential partners on the exchange is a cost. It is high in China, where barriers to entry are numerous and still heavy bureaucracy. Before entering into any agreement, one must know the capacity and credibility of others. A bounded rationality of actors, adds uncertainty to the changing environment. Economic reforms are relatively recent, it is difficult to know the state of the market. Activate his GuanXi to get information to a relatively low cost strategy is "natural." In other words, social capital GuanXi can overcome the information problem. In networks, the information is given in continuous time and with confidence. For example, an employer who wants to hire will use its relationships. The recruitment will not be the most efficient but it will be more loyal and more engaged.

Instant Market costs or the costs of an agreement are also high. It is to decide the property of the transaction, their prices and terms of trade. These costs are also a decisional problem minimized by GuanXi as negotiations are facilitated.

Finally, the ex post costs of market concerning the execution of the transaction and any prosecutions are high immaturity of law. These costs are an issue of trust as it is to control the behavior of partners (agency cost). As a result, actors rely on their GuanXi to ensure that the terms of the agreement will be respected because GuanXi deters opportunism marginalizing the free rider. The parties are encouraged to behave in accordance with their promises, otherwise the loss of face, reputation or rupture of GuanXi play as sanctions. Failures due to opportunistic behavior and are undervalued because the cost of the destruction of relational capital is important in a society where it is valued.

To resume the distinction made by Williamson (1985), GuanXi minimizes the costs of Chinese behavior (bounded rationality and opportunistic behavior) and transaction costs (complex and uncertain environment leading the Chinese to take risks). The behavioral uncertainty is reduced through the GuanXi network that conveys information and contains implicit dissuasive sanctions. Opportunism ex ante and ex post opportunism are severely limited.

GuanXi bypassing institutional uncertainty through informal mechanisms reducing transaction costs makes it essential therefore less certain ground rules for the proper coordination of economic activities.

3.2.2 Substitute formal rules

In Western countries, property rights are protected by the state and the courts while trade markets are reinforced by contracts and legal institutions that support them. China is currently the strength of a formal institutional framework but lacking the necessary institutional support for economic activities is obtained from GuanXi. The latter is reducing transaction costs in place contractual Western techniques.

In reality, the market does not require legal contracts per se but a level of security and predictability in transactions, and the assurance of a remedy to deal with commitments denied. In China, GuanXi is the mechanism and not the law of contract that meets these requirements.

In the current state of the formal structure for market transactions makes prohibitive transaction costs, rely on personal relationships is the surest way to ensure that the terms of trade will be respected by the parties . GuanXi in B2B relationships are maintained and renewed transactions. Contract and contract law may be secondary since there are effective sanctions for non-legal (exclusion resulting in the loss of access to resources embedded in GuanXi).

Adjusting behavior, GuanXi replaces the legal formalism of the States right because it is a device for producing trust company-specific community. Communitas lie (cum) the gift (munus) and duty (onus). It united people, not by a 'property' but a duty (Vandermeersch, 2003). In the West, the contract placed at the foundation of society is the formal institution used by individuals to secure their property and to immunize. In the social community Chinese GuanXi is responsible for reciprocal duties. In other words if, in Western countries, and the contract confiance21 are complementary coordination (Brousseau, 2001), in China, GuanXi and are confiance22. The contract (hetong) is certainly more Chinese entrepreneurs used but still prefer such confidence in the quality of their networks GuanXi. The contract is for the moment a form of reminder of the agreement that was made possible by GuanXi. It shows the word in the network and give rise to other relations. It is not the end of a negotiation, but the document reflecting an agreement is the beginning of future collaborations (Zhang, 2002).

Since reforms in 1978, the mechanism of GuanXi has been reactivated because it reduces the risks for trade and stabilize relations between the actors of the economic game in an environment undergoing profound changes. This informal institution led to the order northien23 instead of some formal institutions.

The impact of public relations ramifications.

2.1. GuanXi network

2.1.1. Open the door to relationships

There is no consensus on the definition of GuanXi. It is a complex phenomenon alien to Western culture. In the literature, there is a question most often "connection", "social network" or "interpersonal relationships". In general, GuanXi involves relationships between people, social relationships, or dyadic relationships based on mutual interest implicitly.

While relationships are centuries old China, the term "GuanXi" in the mid-1970s. "Guan" means "way" or "barrier" (common name) or "close" (verb) "xi" means "system" (common name) or "bind" or "tie" (verb). "GuanXi" can mean "you have to cross the barrier to build relationships" or "find the door of human relations." Maxims summarize that implies the word "GuanXi", "Who you know is more important than what you know" or "I scratch your back, you scratch mine."

Speaking of GuanXi is to evoke such a special relationship, specific relationships that two people together or a special relationship between a person who needs something and another that has the ability to give (Fan , 2002). All relationships do not necessarily lead to GuanXi. This is a special relationship between two people depending on the nature of their relationship called the base of GuanXi (GuanXi base). Three types of bases have been identified. The first is based on blood ties (family, kin: jia-ren), the second on family ties (same residence, schooling and university, work, business: shu-ren) and the third on the links acquired (friendships , knowledge, relationships with strangers: sheng-ren).

The existence of a basis of GuanXi does not automatically GuanXi assets. Each person has hundreds of GuanXi bases but some do develop GuanXi. Conversely, it is possible to develop a GuanXi without having the base.

The base of GuanXi is a fact, but GuanXi is a deliberate action to achieve a specific goal. It is a solution to a problem involving a person that can be contacted in all circumstances, which is not the case of a simple relationship. GuanXi is alive, dynamic, active. It is similar to an electrical circuit to which the individual can connect and which he can disconnect. All Chinese GuanXi has several, several identities may overlap, interlock or oppose. According to current needs, it will make reference to one or the other.

GuanXi is a form of wealth, a resource which can be tapped when needed. Develop and maintain a GuanXi is like having a precautionary savings or insurance (Fan, 2002). But this asset consists of "debt" and "debt." Activate a GuanXi to find a solution to a problem is similar to a claim that a "price", that is to say it will grant favors in return. Thus GuanXi is also a form of exchange (transaction GuanXi). In the words of Mauss, GuanXi is based on "the obligation to give, receive and repay" (Lautard, 1997). Belong to a GuanXi involves reciprocal obligations which the Chinese call "the duty of human feelings" (Renqing). Finally, GuanXi is a process of social interaction begins with two people and can involve other. If A uses B to find a solution, B may well, if he does not answer then it must honor the request of A, involve any of the other C GuanXi which he knows will satisfy A (Fan, 2002). Problems being faced by individuals of various kinds of GuanXi three categories were developed from three types of bases. GuanXi family (family GuanXi) and GuanXi support (helper GuanXi) are used to solve personal problems. The first is based on emotional ties (feelings), while the second relies much more on links of interest without feeling rejected or empathy. Finally, the business GuanXi (business GuanXi) to find business solutions through personal networks of purely utilitarian. In this case, either the two individuals belong to the corporate world, this is known as GuanXi B2B (Business to Business), or one is a businessman while the other is a public body, we speak of B2G GuanXi (Business to Government) (Fan, 2002).

2.1.4 The art of GuanXi (GuanXi xue)

In a country where corruption is estimated importante13 (Guo, 2009), GuanXi is often presented, especially in Western literature as a factor of corruption impeding economic enrichment (Fukuyama, 1997; Rocca, 1996, 1997 , Lautard 1997; Guthrie, 2002). The term "crony capitalism (crony capitalism)" is first and foremost China (Balme, 2008). In fact, in the web of personal relationships in China, it is very difficult to clearly separate the "good" relations "bad." GuanXi forms a multidimensional continuum of interpersonal behavior. There is not a clear dichotomy between "good" behavior and "bad" (Wellman et al., 2002). It is therefore difficult, especially for a foreigner to understand how it switches from one universe to another, exchange based on solidarity and reciprocity pending that returning a purchase "informal" resources of any type.

We must distinguish GuanXi to establish good relations in general and business in particular for the long term, and handling of GuanXi for corrupt short term. There GuanXi, informal institution secular ethics, and the abuse of relational and moral sentiments in China. GuanXi (the great GuanXi) is not causing the diversion of GuanXi and corruption consisting only use relations for strictly personal (Guthrie, 1998).

Theory clearly distinguishes the great GuanXi corruption. The first involves long-term personal relationships while the second leads to very short-term relationships. If the great GuanXi based on moral values, corruption is obviously morally wrong. If the great GuanXi has a legal aspect recognized by tradition, corruptive practice of GuanXi is pursued by the law. The great GuanXi is also based on the exchange of favors when corruption is based solely on monetary exchange. Not meet its commitments GuanXi lose face when corruption is the risk of a criminal conviction. Finally, the exchange of GuanXi involves a group of people instead of the corruption that involves two players (Fan, 2002). More fundamentally, the immediate exchange of favors is not the largest but the GuanXi GuanXi venal. The great GuanXi indeed requires time which involves the exchange of favors and intertemporal cooperation continues (Standifird, 2006).

If Westerners for any transaction giving rise to gifts is a pot of wine, the Chinese are sufficient master the rules of "gift exchange" to see if they are in an offering of the gifts or commissions. Favor maintains the relationship and builds trust while the payoff is that the purpose of a single transaction immoral destructive of trust (Hsu, 2004).


To conclude GuanXi remains a too specific and varied to be truly analyzed. China built its own GuanXi each depending on whom it is (region of origin, affinities, and personal history) but also in terms of his entourage. Thus GuanXi closely resembles our Western models but its cultural references he created his own universe and making it extremely difficult theoretical approach. A bit like a wild animal can never completely tame despite all the goodwill that can be put. Only the master can people from China and being Chinese-born, foreign entrepreneurs and companies cannot hope to get along with their Chinese partners.