Open Access

Florian Friedrich

• The People’s Republic of China has now been a popular target of foreign investments for years as its continuous economic growth makes it one of the most promising markets of the future. While during the last decades, international corporations held a dominant position over native firms, in recent years operating on eye level has increased in importance due to China’s growing economic power. Because of the tradition loaded past of the country and the fundamental differences compared to most western cultures, frequently even multinational companies struggle to cope with the diverse cultural influences. Amongst those various cultural concepts, the term guanxi in particular attracts the attention of the western business world. While guanxi constitutes a fundamental part of Chinese everyday life, in the western world it is often associated with corruption and unethical business practices. This work aims to reduce cultural misunderstandings on the side of western firms and help create a deeper understanding for fundamental principles of Chinese networks. The question on which this paper is based on was which role guanxi plays in modern Chinese society and how western companies may capitalize on this concept. After examining the relevant literature as well as conducting two expert interviews, it shows how guanxi has been influencing the Chinese way of life for centuries and is still relevant in today’s Chinese business world. Form Human Resource Management to mobilizing financial resources, the success of a business in China is often closely linked to a company’s ability to manage guanxi. Therefore it is recommended for western firms to not only gain a deeper understanding of the concept of guanxi and its underlaying principles, but also actively invest in their own guanxi-network.