Is guanxi ethical? A normative analysis of doing business in China

This paper extends the discussion of guanxi beyond instrumental evaluations and advances a normative assessment of guanxi. Our discussion departs from previous analyses by not merely asking, "Does guanxi work?" but rather "Should corporations use guanxi?" The analysis begins with a review of traditional guanxi definitions and the changing economic and legal environment in China, both necessary precursors to understanding the role of guanxi in Chinese business transactions. This review leads us to suggest that there are distinct types of, and uses for guanxi. We identify the potentially problematic aspects of certain forms of guanxi from a normative perspective, noting among other things, the close association of particular types of guanxi with corruption and bribery. We conclude that there are many different forms of guanxi that may have distinct impacts on economic efficiency and the well-being of ordinary Chinese citizens. Consistent with Donaldson and Dunfee (1999), we advocate a particularistic analysis of the different forms of guanxi.