Lecture 3 Guanxi Management

“… All who have the government of the kingdom with its states and families have nine standard rules to follow; the cultivation of their own characters; the honoring of men of virtue and talents; affection towards their relatives; respect towards the great ministers; kind and considerate treatment of the whole body of officers; dealing with the mass of the people as children; encouraging the resort of all classes of artisans; indulgent treatment of men from a distance; and the kindly cherishing of the princes of the states..”

—the Doctrine of Dynamic Balance

Explanations from Local Sociologists

Self-organization-based governance relies on an atmosphere of trust, which in turn relies on good guanxi management. There is always a misunderstanding that guanxi management is all about manipulating guanxi for short-term interests. It is indeed opposite to reality, as manipulating guanxi is very harmful to long-term trust and, hence, is the misconducted behavior that should not be done in guanxi management.

Granovetter pointed out that minimal trust exists in all the three basic models of governance. Guanxi management is therefore needed for governance based on either the market, or hierarchy or self-organization. Notwithstanding, guanxi management is the most important in case of self-organization based governance, because the behavioral logic of self-organization is mutual benefit and mutual trust, and the entire atmosphere is consultation for consensus. Chinese society is the one for which self-organization is most suitable, because Chinese are good at guanxi management and, naturally, are apt to build an atmosphere for the governance of this sort. And all these derive from their family ethics.

What is the particularity of relationships among Chinese? In other words, what is the difference between Chinese guanxi and social relations or social ties in the Western society? Fei put forward the concept of ―The differential modes of association‖. He observed that people in the West were bundled into groups like stacks of firewood and that races, occupations, religions, etc., were the criteria for telling them apart and bundling similar ones together; people in the same group were more similar to, and accordingly identified with, each other, and obey the same rules. He referred to such society as ―society with a group-based structure.‖

But that differs greatly from Chinese society.

25 In Chinese society, social network is like ripples caused by a stone thrown into water, that center on an ego. And the relationships between you, the focal person, and others are just like these ripples. Those who are closer to you have stronger relationships with you. Likewise, those who are not that close to you have weaker relationships with you till you do not know each other

– you are strangers with no interrelationship at all. Chinese norms and ethics are actually not unified or universal. Instead, different ethical standards are employed depending upon closeness or interrelationships. Theft, for example, is a bad thing, and you should call the police once you see someone is stealing something. But what if the stealer is from your family? Confucius said that ―The father conceals the wrongs of his son, and the son conceals the wrongs of his father. This is fairness!‖ It means that lying is a bad thing but that it is tolerable if you tell a lie for one of your family members in order to conceal his/her wrong. As the relationships go weaker, requirements from family ethics become less stringent. In other words, the standards defined in family ethics become more applicable for closer relationships.

Next, I would like to explain characteristics of relationships among Chinese with an indigenous psychological theory. The theory of ―social-oriented psychology‖, by Yang Guoshu (Yang, 1993), groups relationships among Chinese guanxi into three categories by closeness: Family ties, familiar ties and acquaintance ties.

Figure 3.1 The Diagram of Three Types of Chinese Guanxi Different relationships are followed by different behaviors and ways of addressing conflicts, which in turn cause different results. Taiwanese scholar Hwang, Kwang-Kuo (Hwang, 1987; 1988) also grouped relationships into three types: Expressive, instrumental and mixed ties. These two methods of categorization are essentially very similar to each other, according to Yang Yiyin, a researcher at the Chinese Academy of Social Sciences (CASS). Accordingly, I will then explain them together:

Firstly, family ties, including real and pseudo-family ties. Sometimes I prefer the concept of pseudo-family ties, which also include the closest ties from marriages, adoption and blood brothers (or sworn sisters). The need rule is applicable for such ties. In other words, I should have what you have; you should satisfy, unconditionally, all my needs; and we are not allowed to say anything like ―This is mine, not yours‖, not to mention pricing or bargaining. If a man asks his brother to drive the former's wife to the airport, for example, the latter should not ask the former to pay for it, but do it unconditionally. There should be such a relationship among family members that ―I will give you a hand whenever you need it‖ in China. Briefly, we may say that it is a type of collectivism.

Secondly, the equity rule applies to acquaintance ties, or instrumental ties in Hwang's classification, that is, pricing and bargaining are allowed and fair deals can be made. In this situation, Chinese become perfect economic men. A main quality of Chinese, however, is that there is an important type of mixed relationships between family and acquaintance ties, that is, familiar ties.

Thirdly, familiar ties, i.e., mixed ties in Hwang's definition, are applied for Renqing rule—i.e. the favor rule or the favor-exchange rule. They are a type of exchange relationships under the camouflage of family ties. There are expressive interactions between friends, and the reason we say familiar ties are under the camouflage of family ties is that they will, actually and ultimately, lead to fair exchanges. That is in contrast with family ties where you may take something whenever you need it without having to do anything in return. Nonetheless, although familiar ties will ultimately lead to fair exchanges, such exchanges cannot be made undisguised. Instead, they must be made under the camouflage of expressive ties. Jack did Tom a great favor, for example. Tom was very grateful to Jack and repeatedly said things like ―It's just like you saved my life‖ and ―I really don't know what to do in return.‖ And Jack would say things like ―It's a piece of cake‖, ―You are my friend and I'd like to do anything for you‖ and ―It's what I should do.‖ But Tom knew that he would need to do something in return sooner or later. This is so-called a ―favor debt.‖

Every Chinese has a number of favor debts in mind. Favor debts have several characteristics. Firstly, it is impossible to square them up. Secondly, they are highly need-specific in the mutual-benefit context – particular services are provided to meet the needs of the other party. Thirdly, neither bargaining nor pricing is allowed, and you cannot make it clear that you are doing this in return. Fourthly, favor debts cover almost all things, such as money, power, knowledge, honor, reputation and emotional support. Favor debts, indeed, are guanxi contracts that don't have to be in a written form and that cannot make it clear what is exchanged for, not to mention the validity period (the longer, the better, of course). But both parties know what their respective rights and obligations are, and neither of them would destroy the tacit understanding.

Although favor debts seem so unclear, each party to them has a roughly clear understanding that what he has received and what he should do in return. This of course needs a common value assessment standard so as to make fair favor exchanges. Otherwise, such ties would break sooner or later if either party has spent much time and energy on the favor exchange while the other party thinks it is just a piece of cake. That is because the former would feel that he has been hurt or even betrayed.

In the Chinese language context, the term ―guanxi‖ generally means all these three types of social ties. But sometime, we may use this term in its narrow-sense definition indicating only strong ties, i.e. including only family and familiar ties.

Which is followed by Chinese, collectivism or individualism? This question is controversial. It is generally believed in the West that Chinese follow collectivism, and quite a many scholars and experts agree on this belief even though they know little or even nothing about this issue. Nonetheless, we often say that the Chinese nation is the most selfish one in the world. What exactly, then, are Chinese like, altruistic or selfish? Liang Qichao (a most-prominent scholar, journalist, philosopher and reformist during the Qing Dynasty) launched a debate about whether Chinese were like pieces of sand or a single piece of clay. Sun Yat-sen (the founding father of the Republics of China) believed that Chinese were just like pieces of sand; Lu Xun (a famous novelist in the early 20 century) also believed that Chinese were the most selfish people in the world, as represented by Ah Q, the protagonist in the True Story of Ah Q written by Lu Xun. But I think that the answer is not that simple.

The behavior of Chinese, indeed, is changeable. In the case of family ties, including real- and pseudo-family ties, Chinese are collectivistic and are willing to be altruistic to their family. In the other cases, however, they become increasingly individualistic. As Francis L. K. Hsu put it, the behavior of Chinese is characterized by situation determinism. In one situation, you are in my circle and he outside it. In another situation, however, you become an outsider when another person closer to me appears. To sum up, Chinese deal with people in their circles in a way different from the one when they deal with outsiders, that is, their behavior changes with the situation.