The paper "Social Capital in China Based on Guanxi " is a perfect example of a micro and macroeconomic case study. Guanxi is a concept in china that refers to the relationship between people. In business, it is a form of preferential treatment that a partner is given in exchange and includes easy ease of access to resources, access to controlled information, credit and protection in case of competition. Through Guanxi, there is the creation of favours and obligations. In modern China, the concept of Guanxi plays a major role in the business (Guan, 2011).
When one has good Guanxi when doing business in China, they are able to enjoy favours. The concept of Guanxi is deeply rooted in Confucius. Under globalisation, Australian firms have been looking for ways to increase their revenue. China has become of the most favoured destination for Australian firms. While a lot of Australian firms have expanded their operations to China, it has been noted that they face a complex task of Guanxi especially when carrying out negotiations. Guanxi is one of the most important cultural traits of Chinese people, especially when doing business.
In negotiations, Guanxi looks at the process of relationships, connections, trust and friendship (Tung, Worm, & Fang, 2008). To succeed in Chinese business dealing requires friendship and a lasting relationship. This report discusses the importance of the concept of Guanxi when establishing business between Australia and China. Social capital in China based on Guanxi Social capital is based on the way relationships among individuals which facilitates action. It’ s the opportunity that one receives by establishing close relationships with others. For the East Asian countries such as China, they have a great influence from Confucius (Hitt, Lee & Yucel, 2002).
This influence leads to the importance of interdependent relationships. In China, building relationships is based on Guanxi. Guanxi is an important factor in Chinese business success. This is due to the fact that Chinese business networks depend on Guanxi relations. The Guanxi network is a core competence and a competitive advantage when carrying out business in China. The business variables in which Guanxi is embedded in enhancing business success. Sale force marketing and credit liberalisation have been identified as the most important business variables that are embedded in Guanxi (Hitt, Lee & Yucel, 2002).
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