This research proposal seeks to introduce and examine the effect of the Confucianism, Guanxi, in particular, on China’s successful economic development. Researchers have attributed the vast economic success of countries like Taiwan, Hong Kong, Japan, Korea and China to Confucianism and its attributes of hard work, thrift and perseverance (Yeung & Tung, 1996). The paper focuses on Guanxi or social connections as an enabler of economic development in China. Using evidence of secondary materials such as peer reviewed journal articles. the paper will look at the cultural and institutional set up of China, that make Confucianism and guanxi in particular, critical elements in economic growth and transformation.
The paper focuses on Confucianism because it is at the center of Chinese social and economic relations (Guthrie, 2009). Understanding Confucian influence is critical to understanding the new role Confucianism plays not only in the Chinese economy but also the global economy. Chinese state-led capitalism now challenges the orthodox view that only a free market economy is able to bring about economic transformation. Research by Yeung and Tung(1996) shows the importance of Guanxi or social networks in China’s economic development. They discovered that in China, a strong relationship exists between guanxi and better financial performance of a particular firm. This research also noted that Guanxi is a necessary element in short term business success but can hinder long term progress. Relationships based on guanxi are argued to be person specific and rarely transferable to firm relations (Yeung & Tung, 1996). The research however is limited to cultural factors and little is expended towards how it contributes to institution building and sustenance.
The paper contributes to literature on varieties on global economic systems, institutional economics and East-Asian studies. It will show that the sustained economic growth of China is a result of a mix between guanxi and the opening up of parts of the economy to global competition. Poznanski (2015) calls China’s new Confucian based economy, the “Confucian system” which is quite different from the Western individual based capitalism system.
Even though, guanxi has been identified in earlier literature as central part of Chinese social and economic life, the exploration of its impact on institutions has been minimal. Guthrie found out that guanxi denotes two distinct but interchangeable things. First it refers to social relations or the role of guanxi in Chinese society, and, it refers to the gift economy. What makes the Chinese social networks distinct is the centrality of these networks to society, culture, and everyday life. Guanxi can be understood from both the cultural and institutional approaches (Guthrie, 2009). Within the cultural approach, it is a product of deep seated aspects of Chinese culture and tradition. Institutionally, guanxi is a product of institutional relationships and constraints.
It is important to note that scholars holding the cultural approach to understanding guanxi contend that guanxi practices may decline in some domains but it may find new areas in which to flourish, such as business transactions and may display new social forms and expressions. It is the institutional understanding of guanxi that this research seeks to advance.
References
Chao, T. (1990). Culture and work organization: The Chinese case. International Journal of
Psychology 25, p. 385-392.
Guthre, D. (2009). China and Globalization: The Social Transformation of Chinese Society, New
York & London Routledge.
Poznanski, K. Z. (2015). Confucian economies: The world at work. The World Review of
Political Economy 6, 2, p. 208-251.
Yeung, I. Y. M. & Tung, R. (1996). Achieving business success in Confucian societies: The
importance of guanxi (Connections). Organizational Dynamics, p. 54-65.
