[4][5] Guanxi has a major influence on the management of businesses based in mainland China, Hong Kong, and those owned by Overseas Chinese people in Southeast Asia (the bamboo network).
[6] Guanxi networks are grounded in Confucian doctrine about the proper structure of family, hierarchical, and friendly relationships in a community, including the need for implicit mutual commitments, reciprocity, and trust.
[8] Guanxi is also related to the idea of "face" (面子, miànzi/mien-tzu), which refers to social status, propriety, prestige, or a combination of all three.
[13] Guanxi also acts as an essential informal governance mechanism, helping leverage Chinese organizations on social and economic platforms.
Knowing this, some economists have warned that Western countries and others that trade regularly with China should improve their "cultural competency" in regards to practices such as guanxi.
In doing so, such countries can avoid financial fallout caused by a lack of awareness regarding the way practices like guanxi operate.
[15] Note that the aforementioned organizational flaws guanxi creates can be diminished by having more efficient institutions (like open market systems that are regulated by formal organizational procedures while promoting competition and innovation) in place to help facilitate business interactions more effectually.
[13] In East Asian societies, the boundary between business and social lives can sometimes be ambiguous as people tend to rely heavily on their closer relations and friends.
This can result in nepotism in the workforce being created through guanxi, as it is common for authoritative figures to draw from family and close ties to fill employment opportunities, instead of assessing talent and suitability.
[17] However, cronyism is less obvious and can lead to low-risk sycophancy and empire-building bureaucracy within the internal politics of an organisation.
For relationship-based networks such as guanxi, reputation plays an important role in shaping interpersonal and political relations.
Key government officials wield the authority to choose political associates and allies, approve projects, allocate resources, and distribute finances.
This is often the case when businesspeople interpret guanxi's reciprocal obligations as unethical gift-giving in exchange for government approval.
The line drawn between ethical and unethical reciprocal obligation is unclear, but China is currently looking into understanding the structural problems inherent in the guanxi system.
Guanxi allows the diaspora to maintain their networks and foster close relations with people in their home country and form a subethnic enclave within society.
[28] Li's Performing Bribery in China (2011)[27] as well as Wang's The buying and selling of military positions (2016)[29][30] analyze how guanxi practice works in corrupt exchanges.
This question is especially critical in cross-cultural business partnerships, when Western firms and auditors are operating within Confucian cultures.
Western-based managers must exercise caution in determining whether or not their Chinese colleagues and business partners are in fact practicing guanxi.
Nevertheless, the points of view in which these dimensions are understood and consolidated into business tasks are extensively disparate in the East vs the West.
Instead, from the Eastern point of view, trust is additionally synonymous with obligation, where guanxi is required to be kept up through persistent long haul affiliation and connection.
In conclusion, compassion is a measurement that is exceedingly implanted in Eastern business bonds, the significance for dealers and clients to see each other's needs is extremely important.
Chinese culture borrows much of its practices from Confucianism, which emphasizes collectivism and long-term personal relations.
Western relationship marketing, on the other hand, is much more formally constructed, in which no social obligation and further exchanges of favors are expected.