Doing business in China : Is the importance of guanxi diminishing?

Abstract

Purpose: Guanxi has been well documented as being an essential part of doing business in China. Yet, as China continues with market liberalisation, there are indications that its strategic importance is set to decline. From a joint venture perspective, this study seeks to examine the strategic importance of guanxi when doing business in China. Design/methodology/approach: First, the researchers reviewed articles on guanxi and established that although guanxi is still widely considered important, some experts are arguing that this importance is diminishing. Second, qualitative research was used to create a holistic picture of the importance attached to guanxi in UK-Chinese joint ventures. This involved 25 semi-structured interviews with those involved in establishing or managing such a joint venture. Findings: Although guanxi remains important when doing business in China, a number of factors indicate that this importance may begin to decline. These include China's market liberalisation, outward investment, "guanxi learning" on the part of foreign companies and online intermediaries. Research limitations/implications: Since the paper is based on a review of existing research and 25 qualitative interviews, the findings are largely exploratory. Future research might focus on a larger sample, different industries or possibly Chinese firms engaged in outward investment. Practical implications: The findings suggest that to simply describe guanxi as being "important" is too simplistic. Hence, by identifying issues that are likely to affect the strategic importance of guanxi we can help both parent company managers and those engaged in Chinese business practice. Originality/value: Both the review of existing papers and empirical findings help academics to understand a "contemporary view" of guanxi. While managers that have an interest in China can gain a clear understanding of guanxi and its significance in modern day China.