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Gifts, Bribes and Guanxi: What's it all About?
by Valerie Sartor
2014-09-17 10:12:10
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Many foreign businessmen have come to China hoping to establish firms and seeking equitable ways of earning profits. Some erroneously assume that western ways in which capitalist markets, business enterprises, and entrepreneurial activities take place, would match exactly to the Chinese way of conducting business.

Before going into details, I ask my readers to first explore the term “capital,” noting that the conventional definition of capital – economic capital – covers, according to the French philosopher Bourdieu, only one aspect of this concept. And in fact, in China, other kinds of capital: what Bourdieu defined as symbolic, social, and cultural capital, are translated and interlinked differently when people do business.

Specifically, social interactions requiring the exchange of goods and services – doing business - inevitably address the topic of gift exchange. Chinese gift giving can be better understood by becoming aware of the processes that lead to gift giving, and by comparing it to the definitions of other kinds of exchange, namely, the bribe.  Foreigners frequently misunderstand the Chinese etiquette of gift exchange, labeling it as bribery; foreign businessmen also misunderstand the relationship between guanxi (social connections) and gift giving.

Firstly, in China, gift giving should not be examined via the giver’s motivations, nor in the obligatory gift/debt relationship that is created, but rather in regard to Chinese social etiquette concerning gifts. To be successful as a gift giver, one must offer in such a way that the recipient feels no discomfort in becoming obligated by receiving the gift. Otherwise, the gift becomes a bribe, and both parties lose face.

Also noteworthy is that gifts are forms of capital. According to Bourdieu, capital can consist of anything that can be used to influence the behavior of others or to achieve desired goals. Bourdieu defined four kinds of capital:

Economic capital – money, commodities, assets, and means of material assets – are necessary for business to flourish.

Symbolic capital – prestige and renown, attached to a family or name or brand – are also needed in the entrepreneurial world.  Moreover, symbolic investment capital – assisting the needy, offers the giver future claim to the labor or resources of those helped.

Social capital – one’s connections and social network (guanxi) highlights one’s advantages of social position, trustworthiness, and may be tied to economic capital, as with the son of a wealthy scion.

Finally, cultural capital – what the actor knows and is capable of doing – will help him to create wealth, products, privilege, and income.  Cultural capital can be embodied in a businessman via education and cultivation. Institutions and governments, for example, may recognize it, by offering special privileges to business magnates and elites.

Gift exchange in China is designed to be a form of social investment to create all these kinds of capital. Significantly, gift giving should appear spontaneous and disinterested.  Chinese recipients also know gifts must be reciprocated, but not too quickly, or both parties will lose face. If the exchange becomes blatant or hasty, the gift becomes a bribe. Additionally, insecurity exists, as some gifts are given but the receiving party may not reciprocate, especially if the exchange involves foreigners.

Now let us turn to relationship between business and gift giving in China. To run an enterprise on a capitalist basis within a socialist nation is not easy.  Creating and using social ties effectively can speed up the process of establishing firms and lowering costs, because social networks (guanxi) are more effective in China than legal contracts. In China, capitalist business relationships thrive via gift exchanges: as a socialist society, businessmen here operate differently than western capitalists. Even today, many Chinese have no experience of trusting corporate and institutional systems and there is still a huge gap between the legal and societal infrastructure needed for western capitalism.  Expanding social relationships built on gift giving solves these issues by creating trust among businessmen. This trust relationship also increases investment profits and lowers interference from unwanted bureaucrats.

For China’s entrepreneurs, the art of guanxi- building and cultivating social relationships – is tied intimately to the art of giving gifts. One starts with pre-existing relationships: classmates, family members, hometown friends, workmates – later extending one’s network by exchanging gifts, favors, and banquets. But cultivating guanxi means more than negotiating deals that benefit both parties. If conducted artfully, gift giving becomes a way of strengthening trust in valued social relationships, which are meant to last a lifetime, and which may be celebrated personally as well as professionally.

Foreigner businessmen are often solicited to participate in gift exchanges, with the Chinese counterpart presenting the first gift. They are not attuned to the cultural protocol, or they see gift giving as bribery. If the exchange continues, explicit demands may be higher than if the foreigner had understood gift-giving protocols. Another outcome might be a one-time deal, rather than an ongoing business partnership. For these reasons, it’s vital that foreign entrepreneurs seek to understand and accept Chinese culture. 


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Dick2014-09-18 05:35:03
Interesting, provides insight into the Chinese culture.

ken2014-09-18 16:00:12
Interesting article. The differences between western and Chinese ways of doing business are both obvious - and subtle. Sometimes it is very easy to get confused about even the simple things. Hopefully after reading this i will be a bit more sophisticated in my understanding of these things.

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