Guanxi's consequences: Personal gains at social cost

Abstract

Is guanxi ethical? This question is largely ignored in the existing literature. This paper examines the ethical dimension of guanxi by focusing on the consequences of guanxi in business, from ethically misgiving behaviour to outright corruption. Guanxi may bring benefits to individuals as well as the organisations they represent but these benefits are obtained at the expenses of other individuals or firms and thus detrimental to the society. As guanxi has an impact on the wider public other than the guanxi parties, it must be studied in the context of all stakeholders. It can be argued that guanxi is an inevitable evil under the current political and socio-economic systems in China. Its role and importance in business life will be diminished as the country moves towards an open market system.