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Trouble in the Middle: American-Chinese Business Relations, Culture, Conflict, and Ethics

March 20, 2014 • Americas, China

By Steven P. Feldman

Western businesspeople face a dilemma. China’s growing role in international business means it is nearly impossible not to do business in China. Below, Steven P. Feldman considers the importance of the Chinese middleman, explores ethical conflict, and suggests that when comparing Western and Chinese cultures there is much to respect in both.

It is an interesting irony that guanxi, the socially intense system of informal relationships that undercuts and reverses formal Chinese institutions, is itself a subcategory of the central principle of Chinese culture, hierarchy. Guanxi, in a word networking, connects the individual to a social network of “friends” who can be called upon for favors when needed. These social networks, however, pay tribute to the status of their members. The social status of each member in the broader community is respected within the social network. Yet the exact purpose and function of guanxi is to bypass formal hierarchical systems, institutions, and demands for obedience in the broader society. These intense obligations of respect, required and mapped out in detail in innumerable interpersonal rituals and mannerisms, make efficient action difficult. Guanxi addresses this problem by enabling relationships to develop new types of bonds based on trust and mutual advantage and thus new channels for action. Guanxi, then, is an outgrowth of hierarchy that simultaneously turns back against it, undermining its directives while maintaining its integrity. It maintains its integrity by both respecting hierarchical status within guanxi networks and contributing efficiency to rigid hierarchal structures.

The purpose and function of guanxi is to bypass formal hierarchical systems for obedience in the broader society.

Western businesspeople walking into this system find it difficult to master because they see only two opposite extremes. Many times they experience only chaos. On one hand, the Confucian principle of hierarchy is nowhere more observable than in the government-society relationship. The government is authoritarian and makes extensive if not enormous demands on business, some portion of which can be classified as abuse of power. On the other hand, every rule the government passes, every demand it makes, can be gotten around with the right connections. So simultaneous with the enormous power of the state is a system of relationships that regularly ignores state edicts. Indeed, state officials are right at the center of this system, playing both sides as loyal bureaucrats, “friends,” and rent-seeking individuals.

 
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