Part of the Contributions to Management Science book series (MANAGEMENT SC.)


To conclude this analysis, Chapter 4 shall answer the third question raised in the introduction: Does the application of guānxì-based business strategies conform to legal and ethical standards, both from Chinese and Western perspectives? Because strategy, in a (game) theoretical sense, is not concerned with legal standards, the business strategies of companies whose effectiveness and efficiency improve through the strategic use of guānxì need to be reviewed in terms of legal compliance (Section 4.1). In order to take practical cases into account, such as the “principled withdrawal” of Levi Strauss & Co. (ILO 2004) from the Chinese (production) market, the ethical implications of guānxì-based business strategies will be discussed (Section 4.2). Finally, Section 4.3 concludes this book with a prediction of the period of validity of these findings.


Business Ethic Business Strategy Chinese Manager Criminal Code Trade Secret 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. 187.
    Namely, a maximum of one trip per year, limited to three to five days at each location, unless otherwise required by official business. Deviations from the official travel plan and extensions of the trip are not permitted (CPC Central Committee/State Council 1989, Articles 4–7).Google Scholar
  2. 188.
    Interestingly, the owner of a company is not held liable under Article 299 (not even if he uses an intermediary). This shows that Article 299 is actually geared toward preventing disloyalty rather than unfair competition (Troendle/Fischer 2003: 1936).Google Scholar
  3. 189.
    Benefits compensating previous actions are illegal only if these actions themselves were illegal (Troendle/Fischer 2003: 1936).Google Scholar
  4. 191.
    Cases can be brought to action by the impaired party, chambers of commerce and similar institutions (Troendle/Fischer 2003: 1942).Google Scholar
  5. 193.
    In light of this information, it is unintelligible why Kristen Day (2002: 88) from the World Bank claims that the utilization of guānxì in business is legal.Google Scholar
  6. 194.
    As with the classification of strategies in Section 3.1, different levels of business ethics may be distinguished. The most concrete form is found at one end of an imaginary continuum: face-to-face ethics, which apply to the interaction of individual employees. If moral issues are involved in business functions (e.g. accounting, human resources), functional ethics apply. The general discussion of guānxì and business ethics falls under the heading of corporate ethics, located at the other end of the imaginary continuum. Firm guānxì policy is dictated on the executive floors of corporations, and it affects business operations across many functions and divisions (Post et al. 1996: 94ff.).Google Scholar
  7. 195.
    Zhou Zhongzhi (2001: 22) claimed, though without providing valid arguments, that this beginning stage lies between a “pre-discipline stage of research”, which started in the early 1980s, and a “period of shaping” in effect since the mid-1990s.Google Scholar
  8. 196.
    The survey was conducted by Wu Xinwen (1999), an ethics lecturer at Fudan University in Shanghai. Wu questioned managers of 59 companies in Shanghai, Qingdao, Ji’nan, Changzhou, Hangzhou, and Tianjin about their perceptions of ethics in the workplace.Google Scholar
  9. 197.
    Yet another Chinese scholar who introduced profits into Confucian ethics is Chan (1997). He failed in his attempt to “prove” with a hypothetical example—a Confucian businessman decides to run a green business that helps to improve people’s living environment and at the same time brings him profits—that Confucian ethics are compatible with profit-oriented business decisions.Google Scholar
  10. 198.
    For each of the characteristics, Yang Dongcai (2002: 36) provides explanations, which, however, sound more like political slogans: (1) credit is the overriding concern; (2) be honest to make friends with business partners, then the company’s good reputation will come from credibility; (3) fair trade, no cheating on children and the elderly; and (4) profits through harmonious atmosphere, be righteous to make profits.Google Scholar
  11. 199.
    Shen Junxi (2001: 79) quoted a non-specified 1996 study, according to which two out of three Chinese managers could not describe what business ethics are. It is interesting that those managers who had a basic understanding of ethics placed it above the law (see above).Google Scholar
  12. 200.
    Note that distributive justice can also be part of utilitarian considerations (Hoffmann/Frederick 1994: 64f.).Google Scholar
  13. 201.
    It is actually a common phenomenon in many network structures that network members ruthlessly take advantage of outsiders (Schneider 2002: 100).Google Scholar
  14. 202.
    In fact, proponents of Western law and equal competition are not the only ones to resist guānxì; the Chinese government does too. Yang Meihui (1989: 38, 51) explained this with the subversive effects of guānxì. Not to be cast in the light of a “heroic and organized stance of defiant and uncompromising resistance”—Yang seemed well aware of her politicized tone, because she stressed in her conclusion that she would be free of any judgment-subversion rather means “redistribut[ion of] what the state has already distributed, according to the people’s interpretations of need and to the advantages of (horizontal) social relationships”. Hence guānxì-“vengeance” may be more ethical than the prevailing exchange system.Google Scholar
  15. 203.
    Identically, in an empirical analysis of business ethics perceptions in Eastern China, Wu Xinwen (1999: 548ff.) found that 39% of interviewees accepted the popular practice of offering and accepting kickbacks as ethical (more managers of privately run companies than of SOEs take this view). Also Ang and Leong (2000: 131ff.) noted that the establishment and maintenance of guānxì, in particular through gift giving, may involve unethical practices.Google Scholar
  16. 204.
    Another example is “The Interfaith Declaration: A Code of Ethics on International Business Ethics between Christians, Jews, and Muslims”, which appeared in 1994 (Chryssides/Kaler 1996: 157).Google Scholar
  17. 205.
    In China, IBM is seen by many scholars (e.g. Gong/Zou 2003: 23) as a role model in business ethics. It will be interesting to see if IBM’s ethical awareness will have a spill-over effect on the Chinese Lenovo Group Co. (Open image in new window), which took over IBM’s personal computer division in 2004.Google Scholar
  18. 207.
    Discussing the dynamics of the guānxì system, Yang Minzhi’s (1995b: 43) caricature originally referred to corruption (Open image in new window).Google Scholar
  19. 210.
    This is probably why guānxì in Singapore and Taiwan appears to be less important (Riley 1994: 801; Zhong 1995: 255). Farh et al. (1998: 487) oppose this view, arguing with their empirical findings that guānxì also plays a major role for Taiwanese managers.Google Scholar
  20. 211.
    An explicitly comparative analysis of blat and guānxì, as provided by Michailova and Worm (2003: 7ff.), actually reveals stunning parallels; for similarities regarding debt collection practices, see Hendley et al. (2000: 17).Google Scholar

Copyright information

© Physica-Verlag Heidelberg 2007

Personalised recommendations