Guanxi is a nebulous concept in the business world of China and despite the boost in

economic value it brings, there are certain downfalls in the process. Weaved subtly into
the Chinese culture, guanxi resembles its counterpart in Vietnam: quan he. Guanxi and
quan he have been studied by researchers all over the world with an aim to understand
and, in some attempts, penetrate the economy of China and the rising Vietnam. In this
paper, my objective is to present the history as well as the current status of guanxi and
quan he respectively, meanwhile addressing the question of whether or not to pulverize
their existence. The paper cultivates the definition of the word guanxi and quan he, as
well as subsections of the system itself such as “bridging” and “impression
management”. In addition, this research will serve as the justification for the dilemma of
guanxi in China, bespeaking its cultural importance and its fiscal setbacks. The case of
quan he in Vietnam, though shares a number of similarities with the concept of guanxi,
poses a variation in its characteristic. In the paper, major findings will be mentioned.
The overexploitation of guanxi as well as the nature of the system is clearly stated.
Guanxi is abused in terms of taking bribes, promoting nepotism and clientelism. The
system also leaves an enormous setback in drawing inward investments from foreign
sources as the family-based companies provides under-standard investor protection
and low transparency in their governance strategies. Benefits of guanxi and quan he
emerges, however. It is guanxi that helps people to elevate their own personal image
and expanding their own connections. The paper also advances the notion of relations
having greater influence than money in the Eastern world, especially in China and
Vietnam. Corruption, therefore, is irrefutable and somewhat fundamental in the
development of the economy. Guanxi is, unsurprisingly, indispensable. Overall, it is
concluded that guanxi and quan he should not be eradicated. Instead, the proposed
solution is to partly downsize the influence of guanxi so that China will not fall into the
financial crisis in 1977 once again.
“Once I was seven years old, my momma told me go make yourself some friends or
you’ll be lonely”.

Lukas Graham was never a Chinese boy. Regardless, his lyrics in the song “7 years”
echo the philosophy of Chinese parenting. Here the children are taught to value their
relationships with others. Children are expected to perform well both academically and
socially. However, parenting is often taken to the extremes and so is socializing. Being
nice with others is now based on the condition of a returning favor.

Sadly, this is also the case of the business world in China. People are making more
connections to potentially serve their purposes, promotion for examples. According to
Chi Zhang and his fellow colleagues in their study of guanxi culture in China, guanxi (a
type of personal connection in China) is embedded in Chinese societal and business
behavior. Although it has it plus points of helping people polishing their personal image
and opening a window for the underprivileged to achieve a better life, guanxi is still
overly abused, especially for bribing. Guanxi makes relationships more fragile and
promote trust issues in the modern-day China. If someone’s attitude suddenly changes
for the better towards you then there must be motives underneath. Another major
reason for guanxi to be a bad influence on Chinese economy is the increase of
corruption rate. In the last 25 years China has witnessed an increase in corruption rank
from 40 worldwide to the rank of 87 as in the latest record of Trading Economics. In
2014, China ranked at 100. Surely that is a point that makes Asian parents proud if their
children are in a Mathematics class. But this is corruption ranking and China should not
take pride in the number.

China has made advances in reforming its government system since the financial crisis
in 1977, but if they truly want to eliminate potential downsides then they have to begin
cutting guanxi down. For starters, China can impose a law to strictly control under-table
transactions, which contributes greatly to China’s shadow economy. In addition, parents
can start teaching their children to build more relationships based on emotional bonds,
which is more sustainable and long-lasting than any relationships that are favor-based.
Finally, it is better to encourage creativity and ingenuity than promoting people’s
reliance on relationships to elevate their career.
If China wishes to be developing in a more sustainable way, guanxi is not the answer.
China must first curtail its overreliance on guanxi and, in the long run, keeping guanxi at
a flat level.