6 - Guanxi

Summary

This chapter demonstrates that personal relationship networks (guanxi) are still an important element of the Chinese corporate ecosystem, undermining central control through subversive, self-interested informal social structures. Though not as necessary in everyday commercial transactions any more due to the rise of e-commerce and standardized contracts, guanxi is still essential for private firms to gain access to limited natural resources and large-scale finance from state banks during their growth phase and to receive protection from predation by rapacious officials or powerful competitors. The chapter uses the case of Ye Jianming and the CEFC Group to illustrate both the importance of guanxi for private firm development and the risks of collapse when guanxi strays over the line into corruption. The chapter also shows how multinational financial and pharmaceutical firms have attempted to negotiate the narrow path between guanxi and corruption in China, with only limited success.