Teaching Comparative Government and Politics

Monday, August 24, 2015

Guanxi

You might have heard of guanxi. It's an important key to understanding Chinese politics, government, and society.

"World Learner Chinese" says guanxi, "is a general Chinese term used to describe relationships that may result in the exchanges of favors or 'connections' that are beneficial for the parties involved." It sometimes means simply "networking" and implies trust. The article emphasizes the beneficial nature of "good guanxi." It also notes that "there is a fine line between guanxi and bribery. It can also be a system of relationships that excludes outsiders (like foreign investors).

Business Insder suggests that the importance of guanxi arises from a long-standing lack of rule of law because it promotes a level of trust. The magazine also warns foreign investors that while important, guanxi is not a guarantee for the success of investments in China. Nor is it easy to establish.

The BBC offers this four-minute video report on The mystery of China's guanxi.

What is all this leading up to? It seems that there's an example of bad guanxi in the news. Even the Chinese media are reporting on it.

Chinese Report Details Role of Political Connections in Tianjin Blasts
The mayor of the northern Chinese city where huge explosions killed over 100 people last week took responsibility for the disaster on Wednesday…
NYTimes photograph

“I bear unshirkable responsibility for this accident as head of the city,” said Huang Xingguo, the mayor and acting Communist Party secretary of the metropolis, Tianjin…

The mayor’s appearance came as China’s state-run Xinhua news agency reported that two major shareholders in the company that owns the warehouse, Rui Hai International Logistics, used their political connections to win government approvals for the site, despite clear violations of rules prohibiting the storage of hazardous chemicals within 3,200 feet of residential areas…

The two executives, who deliberately concealed their ownership stakes behind a murky corporate structure, told Xinhua that they used their personal relationships with government officials to obtain licenses for the site. Both men have been detained.

The executives established Rui Hai in 2012 but had other people list their shares to avoid the appearance of a conflict of interest. [One] admitted that he held 55 percent of the shares through his cousin… [The other] holds 45 percent of the shares through a former classmate. “I had my schoolmate hold shares for me because of my father,” a former police chief for the Port of Tianjin who died in 2014, [he] told Xinhua. “If the news of me investing in a business leaked, it could have brought bad influence.”

On Wednesday, Mr. Huang promised a thorough and transparent investigation of Rui Hai.

“No matter who owns the company, what kind of connection there is, we will investigate until the end,” he said…

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